MARZETTI CO — Interim / Quarterly Report 1995

May 11, 1995

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__ to____ Commission file number 0-4065-1 LANCASTER COLONY CORPORATION (Exact name of registrant as specified in its charter) OHIO 13-1955943 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 37 WEST BROAD STREET, COLUMBUS, OHIO 43215 (Address of principal executive offices) (Zip Code) 614-224-7141 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of March 31, 1995, there were 29,831,000 shares of common stock, no par value per share, outstanding. 1 of 9 2 LANCASTER COLONY CORPORATION AND SUBSIDIARIES INDEX Page No. -------- Part I. Financial Information Consolidated Condensed Balance Sheets - March 31, 1995 and June 30, 1994 3 Consolidated Condensed Statements of Income - Three Months and Nine Months Ended March 31, 1995 and 1994 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended March 31, 1995 and 1994 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of the Results of Operations and Financial Condition 7-8 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K 8 Signatures 8 Exhibit 27 - Financial Data Schedule 9 2 of 9 3

3 of 9 4 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

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5 of 9 6 LANCASTER COLONY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE PERIODS ENDED MARCH 31, 1995 AND 1994 (1) The interim consolidated condensed financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim consolidated condensed financial statements are considered to be of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended June 30, 1994. (2) 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. (3) On July 20, 1994, a four-for-three stock split was effected whereby one additional common share was issued for each three shares outstanding to shareholders of record on June 20, 1994. Accordingly, all per share data and the weighted average common shares outstanding for the three and nine month periods ended March 31, 1994 in the accompanying consolidated condensed financial statements have been retroactively adjusted for this split. (4) As approved by its shareholders, the Company has an incentive stock option plan by which 3,625,000 common shares may be issued under options granted pursuant to terms of the plan. During the third quarter of fiscal 1995, the Company granted approximately 210,000 options to employees and officers of the Company. As of March 31, 1995, options for approximately 2,840,000 shares have been granted and 2,518,000 have been exercised under the plan. 6 of 9 7 LANCASTER COLONY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE PERIODS ENDED MARCH 31, 1995 AND 1994 RESULTS OF OPERATIONS Consolidated net sales of $606,353,000 and $191,975,000 for the respective nine and three months ended March 31, 1995 increased 13% and 12% over the corresponding totals of $537,070,000 and $171,492,000 of fiscal 1994. The sales of the Glassware and Candles segment contributed most prominently to this increase with sales of the segment's candle products experiencing significant growth throughout fiscal 1995. For the nine month period, Automotive segment sales benefitted from a generally increased level of domestic new vehicle sales, particularly with respect to light trucks and vans. The implementation of certain cost-driven price increases during this period also contributed to progressively increased sales revenues. Within the Specialty Foods segment, greater foodservice volumes led to an increase in sales for each of the comparable periods presented. Consolidated gross margins have been adversely affected throughout 1995 by certain increased raw material costs. The impact of increased raw material costs has been most pronounced within the Automotive segment where aluminum, rubber and resin-based plastic materials have undergone increases in excess of the segment's ability to increase related sales prices. Impacting the nine month results were increased costs for soybean oil, a major ingredient of the Specialty Foods segment. The increased foodservice mix within the Specialty Foods segment also reduced consolidated gross margins during fiscal 1995. Finally, all segments have experienced significantly higher corrugated costs during fiscal 1995. The foregoing factors were partially offset by certain productivity improvements, particularly in the Glassware and Candles segment, where increased volume, recent capital expenditures and process improvements combined to enhance this segment's margins. Selling, general and administrative expenses of $100,064,000 and $31,899,000 for the respective nine and three month periods ended March 31, 1995 increased less than 2% from the totals recorded during the comparable periods of 1994. Mitigating the increase in such costs were efforts to reduce promotional costs in the Specialty Foods segment as well as issues involving changes in sales mix. Additionally, the fixed portion of such operating costs generally serves to hold the fluctuations of these costs below that of net sales. As a percentage of net sales, income before income taxes and net income for both periods of fiscal 1995 were approximately 14% and 9%, respectively, compared to 13% and 8% during the comparable fiscal 1994 periods. The provision for income taxes for the nine-month period ended March 31, 1994 was impacted by a first-quarter charge of approximately $400,000 to record the effect of the August 1993 enactment of the Omnibus Budget Reconciliation Act of 1993. FINANCIAL CONDITION As of March 31, the Company's balance sheet reflected net working capital of $181,237,000 and a current ratio of 3.4:1.0. As of June 30, 1994, the respective comparable totals were $163,546,000 and 3.2:1.0. Cash flows from operations through March 1995 totaled $34,035,000 compared to $43,620,000 during the nine months ended March 1994. Contributing to the increase in accounts receivable at March 31 was the higher level of sales occurring in March 1995 compared to June 1994. Inventories were impacted by the general increase in sales volumes, rising material costs and contingency stocks built in anticipation of certain labor negotiations. 7 of 9 8 FINANCIAL CONDITION (CONTINUED) Significant nonoperating uses of cash during the nine months ended March 1995 included $16,922,000 for the repurchase of common stock, $22,502,000 for capital expenditures and $12,012,000 for common stock dividends. The latter amount reflects the increased dividend rate which totaled $.40 versus $.32 for the nine months ended March 31, 1995 and 1994, respectively. Through March 31, the Company's capital structure remains generally unchanged with debt (including the short-term portion) comprising 11% of capitalization at March 31 compared to 13% at June 30. The Company continues to maintain discretionary bank lines of credit in excess of $150,000,000 as a contingent source of short-term financing for future capital or other temporary cash requirements. However, absent a significant business acquisition or other unforeseen events, management currently believes that cash internally generated from operating activities will be sufficient to meet foreseeable cash requirements for the remainder of fiscal 1995. PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K - There were no reports filed on Form 8-K for the three months ended March 31, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANCASTER COLONY CORPORATION Date: May 10, 1995 BY: /S/John B. Gerlach ---------------------- --------------------------- JOHN B. GERLACH Chairman, Chief Executive Officer and Principal Financial Officer Date: May 10, 1995 BY: /S/John L. Boylan ---------------------- --------------------------- JOHN L. BOYLAN Treasurer and Assistant Secretary 8 of 9