Annual Report (Form 10-K), fiscal year 1994

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.
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
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.
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.
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.



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:
(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.
Item 3.

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.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is included as an unnumbered item in Part I of this Report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held November 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.
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.
PART II
Item 5.

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.

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.

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.


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.

Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10.



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.

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.

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.
Item 13.

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.

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.
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.
(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.
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.
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