Company Quick10K Filing
Lancaster Colony
Price146.95 EPS6
Shares28 P/E27
MCap4,044 P/FCF32
Net Debt-173 EBIT200
TEV3,870 TEV/EBIT19
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-05
10-Q 2019-12-31 Filed 2020-02-04
10-Q 2019-09-30 Filed 2019-11-04
10-K 2019-06-30 Filed 2019-08-27
10-Q 2019-03-31 Filed 2019-04-30
10-Q 2018-12-31 Filed 2019-02-06
10-Q 2018-09-30 Filed 2018-11-01
10-K 2018-06-30 Filed 2018-08-27
10-Q 2018-03-31 Filed 2018-05-01
10-Q 2017-12-31 Filed 2018-01-30
10-Q 2017-09-30 Filed 2017-11-08
10-K 2017-06-30 Filed 2017-08-24
10-Q 2017-03-31 Filed 2017-05-02
10-Q 2016-12-31 Filed 2017-02-07
10-Q 2016-09-30 Filed 2016-10-31
10-K 2016-06-30 Filed 2016-08-24
10-Q 2016-03-31 Filed 2016-05-03
10-Q 2015-12-31 Filed 2016-02-05
10-Q 2015-09-30 Filed 2015-11-03
10-K 2015-06-30 Filed 2015-08-28
10-Q 2015-03-31 Filed 2015-05-07
10-Q 2014-12-31 Filed 2015-02-06
10-Q 2014-09-30 Filed 2014-11-07
10-K 2014-06-30 Filed 2014-08-28
10-Q 2014-03-31 Filed 2014-05-12
10-Q 2013-12-31 Filed 2014-02-10
10-Q 2013-09-30 Filed 2013-11-07
10-K 2013-06-30 Filed 2013-08-29
10-Q 2013-03-31 Filed 2013-05-08
10-Q 2012-12-31 Filed 2013-02-07
10-Q 2012-09-30 Filed 2012-11-06
10-K 2012-06-30 Filed 2012-08-29
10-Q 2012-03-31 Filed 2012-05-10
10-Q 2011-12-31 Filed 2012-02-09
10-Q 2011-09-30 Filed 2011-11-07
10-K 2011-06-30 Filed 2011-08-29
10-Q 2011-03-31 Filed 2011-05-10
10-Q 2010-12-31 Filed 2011-02-09
10-Q 2010-09-30 Filed 2010-11-09
10-K 2010-06-30 Filed 2010-08-25
10-Q 2010-03-31 Filed 2010-05-10
10-Q 2009-12-31 Filed 2010-02-05
8-K 2020-05-05 Earnings, Exhibits
8-K 2020-03-19 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2020-03-11 Regulation FD
8-K 2020-02-27 Enter Agreement, Exhibits
8-K 2020-02-04 Earnings, Exhibits
8-K 2019-11-13 Shareholder Vote, Other Events, Exhibits
8-K 2019-11-04 Earnings, Exhibits
8-K 2019-08-27 Earnings, Exhibits
8-K 2019-08-21 Other Events, Exhibits
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-03-11 Officers, Exhibits
8-K 2019-01-31 Earnings, Exhibits
8-K 2018-11-28 Enter Agreement
8-K 2018-11-16 Regulation FD, Exhibits
8-K 2018-11-14 Officers, Exhibits
8-K 2018-11-13 Enter Agreement, Shareholder Vote, Other Events, Exhibits
8-K 2018-10-26 Officers, Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-10-19 Regulation FD, Exhibits
8-K 2018-08-23 Earnings, Exhibits
8-K 2018-08-22 Other Events, Exhibits
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-01-25 Earnings, Exhibits

LANC 10Q Quarterly Report

Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Acquisitions
Note 3 - Fair Value
Note 4 - Long - Term Debt
Note 5 - Leases
Note 6 - Contingencies
Note 7 - Goodwill and Other Intangible Assets
Note 8 - Income Taxes
Note 9 - Business Segment Information
Note 10 - Stock - Based Compensation
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
EX-10.1 lanc-2020331xexhibit101.htm
EX-10.2 lanc-2020331xexhibit102.htm
EX-31.1 lanc-2020331xexhibit311.htm
EX-31.2 lanc-2020331xexhibit312.htm
EX-32 lanc-2020331xexhibit32.htm

Lancaster Colony Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.00.80.60.40.20.02012201420172020
Assets, Equity
0.40.30.20.10.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.0-0.0-0.1-0.1-0.22012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
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 000-04065 
 
 
 
Lancaster Colony Corporation
(Exact name of registrant as specified in its charter)
 
 
 
 
Ohio
 
13-1955943
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
380 Polaris Parkway
Suite 400
 

Westerville
Ohio
 
43082
(Address of principal executive offices)
 
(Zip Code)
 
(614)
224-7141
(Registrant’s telephone number, including area code)
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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
 
Accelerated filer
 
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, without par value
LANC
NASDAQ Global Select Market
As of April 17, 2020, there were approximately 27,516,000 shares of Common Stock, without par value, outstanding.





LANCASTER COLONY CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 

2




PART I – FINANCIAL INFORMATION
 
Item 1. Condensed Consolidated Financial Statements
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except share data)
March 31,
2020
 
June 30,
2019
ASSETS
Current Assets:
 
 
 
Cash and equivalents
$
177,798

 
$
196,288

Receivables
87,649

 
75,691

Inventories:
 
 
 
Raw materials
40,108

 
30,647

Finished goods
56,151

 
55,425

Total inventories
96,259

 
86,072

Other current assets
20,269

 
10,518

Total current assets
381,975

 
368,569

Property, Plant and Equipment:
 
 
 
Land, buildings and improvements
181,671

 
163,094

Machinery and equipment
389,200

 
340,232

Total cost
570,871

 
503,326

Less accumulated depreciation
274,436

 
256,282

Property, plant and equipment-net
296,435

 
247,044

Other Assets:
 
 
 
Goodwill
208,371

 
208,371

Other intangible assets-net
66,460

 
70,277

Operating lease right-of-use assets
24,469

 

Other noncurrent assets
15,342

 
11,138

Total
$
993,052

 
$
905,399

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
 
 
 
Accounts payable
$
90,818

 
$
76,670

Accrued liabilities
46,328

 
43,036

Total current liabilities
137,146

 
119,706

Noncurrent Operating Lease Liabilities
19,292

 

Other Noncurrent Liabilities
31,306

 
35,938

Deferred Income Taxes
32,024

 
22,882

Commitments and Contingencies

 

Shareholders’ Equity:
 
 
 
Preferred stock-authorized 3,050,000 shares; outstanding-none

 

Common stock-authorized 75,000,000 shares; outstanding-March-27,515,651 shares; June-27,491,497 shares
124,221

 
122,844

Retained earnings
1,409,994

 
1,359,782

Accumulated other comprehensive loss
(10,099
)
 
(10,308
)
Common stock in treasury, at cost
(750,832
)
 
(745,445
)
Total shareholders’ equity
773,284

 
726,873

Total
$
993,052

 
$
905,399

See accompanying notes to condensed consolidated financial statements.

3




LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
 
Three Months Ended 
March 31,
 
Nine Months Ended 
March 31,
(Amounts in thousands, except per share data)
2020
 
2019
 
2020
 
2019
Net Sales
$
321,363

 
$
317,882

 
$
1,013,534

 
$
984,117

Cost of Sales
244,401

 
242,485

 
744,575

 
736,129

Gross Profit
76,962

 
75,397

 
268,959

 
247,988

Selling, General and Administrative Expenses
46,907

 
37,981

 
132,109

 
109,902

Change in Contingent Consideration
65

 
88

 
192

 
(9,517
)
Restructuring and Impairment Charges

 

 
886

 

Operating Income
29,990

 
37,328

 
135,772

 
147,603

Other, Net
727

 
1,329

 
3,031

 
3,682

Income Before Income Taxes
30,717

 
38,657

 
138,803

 
151,285

Taxes Based on Income
8,288

 
8,053

 
32,205

 
33,746

Net Income
$
22,429

 
$
30,604

 
$
106,598

 
$
117,539

Net Income Per Common Share:
 
 
 
 
 
 
 
Basic
$
0.82

 
$
1.11

 
$
3.88

 
$
4.28

Diluted
$
0.81

 
$
1.11

 
$
3.87

 
$
4.26

 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
Basic
27,457

 
27,448

 
27,447

 
27,436

Diluted
27,501

 
27,549

 
27,502

 
27,543

See accompanying notes to condensed consolidated financial statements.


4




LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
 
Three Months Ended 
March 31,
 
Nine Months Ended 
March 31,
(Amounts in thousands)
2020
 
2019
 
2020
 
2019
Net Income
$
22,429

 
$
30,604

 
$
106,598

 
$
117,539

Other Comprehensive Income:
 
 
 
 
 
 
 
Defined Benefit Pension and Postretirement Benefit Plans:
 
 
 
 
 
 
 
Amortization of loss, before tax
136

 
102

 
409

 
307

Amortization of prior service credit, before tax
(45
)
 
(46
)
 
(136
)
 
(137
)
Total Other Comprehensive Income, Before Tax
91

 
56

 
273

 
170

Tax Attributes of Items in Other Comprehensive Income:
 
 
 
 
 
 
 
Amortization of loss, tax
(31
)
 
(24
)
 
(95
)
 
(72
)
Amortization of prior service credit, tax
10

 
11

 
31

 
32

Total Tax Expense
(21
)
 
(13
)
 
(64
)
 
(40
)
Other Comprehensive Income, Net of Tax
70

 
43

 
209

 
130

Comprehensive Income
$
22,499

 
$
30,647

 
$
106,807

 
$
117,669

See accompanying notes to condensed consolidated financial statements.


5




LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
Nine Months Ended 
March 31,
(Amounts in thousands)
2020
 
2019
Cash Flows From Operating Activities:
 
 
 
Net income
$
106,598

 
$
117,539

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Impacts of noncash items:
 
 
 
Depreciation and amortization
27,672

 
22,677

Change in contingent consideration
192

 
(9,517
)
Deferred income taxes and other changes
9,625

 
3,910

Stock-based compensation expense
4,337

 
4,542

Restructuring and impairment charges
(268
)
 

Pension plan activity
(458
)
 
(602
)
Changes in operating assets and liabilities:
 
 
 
Receivables
(11,958
)
 
(6,220
)
Inventories
(10,187
)
 
(766
)
Other current assets
(15,590
)
 
3,080

Accounts payable and accrued liabilities
9,175

 
8,780

Net cash provided by operating activities
119,138

 
143,423

Cash Flows From Investing Activities:
 
 
 
Payments for property additions
(72,006
)
 
(43,966
)
Cash paid for acquisitions, net of cash acquired

 
(57,540
)
Other-net
(389
)
 
(592
)
Net cash used in investing activities
(72,395
)
 
(102,098
)
Cash Flows From Financing Activities:
 
 
 
Payment of dividends
(56,386
)
 
(52,244
)
Purchase of treasury stock
(5,387
)
 
(5,032
)
Tax withholdings for stock-based compensation
(2,960
)
 
(2,209
)
Other-net
(500
)
 
(203
)
Net cash used in financing activities
(65,233
)
 
(59,688
)
Net change in cash and equivalents
(18,490
)
 
(18,363
)
Cash and equivalents at beginning of year
196,288

 
205,752

Cash and equivalents at end of period
$
177,798

 
$
187,389

Supplemental Disclosure of Operating Cash Flows:
 
 
 
Net cash payments for income taxes
$
30,355

 
$
25,373

See accompanying notes to condensed consolidated financial statements.


6




LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)

 
 
Nine Months Ended March 31, 2020
(Amounts in thousands,
except per share data)
 
Common Stock
Outstanding
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Total
Shareholders’
Equity
 
Shares
 
Amount
 
 
 
 
 
 
 
 
Balance, June 30, 2019
 
27,491

 
$
122,844

 
$
1,359,782

 
$
(10,308
)
 
$
(745,445
)
 
$
726,873

Net income
 
 
 
 
 
40,745

 
 
 
 
 
40,745

Net pension and postretirement benefit gains, net of $21 tax effect
 
 
 
 
 
 
 
70

 
 
 
70

Cash dividends - common stock ($0.65 per share)
 
 
 
 
 
(17,869
)
 
 
 
 
 
(17,869
)
Purchase of treasury stock
 
(10
)
 
 
 
 
 
 
 
(1,465
)
 
(1,465
)
Stock-based plans
 
4

 
(125
)
 
 
 
 
 
 
 
(125
)
Stock-based compensation expense
 
 
 
1,436

 
 
 
 
 
 
 
1,436

Balance, September 30, 2019
 
27,485

 
$
124,155

 
$
1,382,658

 
$
(10,238
)
 
$
(746,910
)
 
$
749,665

Net income
 
 
 
 
 
43,424

 
 
 
 
 
43,424

Net pension and postretirement benefit gains, net of $22 tax effect
 
 
 
 
 
 
 
69

 
 
 
69

Cash dividends - common stock ($0.70 per share)
 
 
 
 
 
(19,245
)
 
 
 
 
 
(19,245
)
Purchase of treasury stock
 

 
 
 
 
 
 
 
(7
)
 
(7
)
Stock-based plans
 
26

 
(2,571
)
 
 
 
 
 
 
 
(2,571
)
Stock-based compensation expense
 
 
 
1,423

 
 
 
 
 
 
 
1,423

Balance, December 31, 2019
 
27,511

 
$
123,007

 
$
1,406,837

 
$
(10,169
)
 
$
(746,917
)
 
$
772,758

Net income
 
 
 
 
 
22,429

 
 
 
 
 
22,429

Net pension and postretirement benefit gains, net of $21 tax effect
 
 
 
 
 
 
 
70

 
 
 
70

Cash dividends - common stock ($0.70 per share)
 
 
 
 
 
(19,272
)
 
 
 
 
 
(19,272
)
Purchase of treasury stock
 
(28
)
 
 
 
 
 
 
 
(3,915
)
 
(3,915
)
Stock-based plans
 
33

 
(264
)
 
 
 
 
 
 
 
(264
)
Stock-based compensation expense
 
 
 
1,478

 
 
 
 
 
 
 
1,478

Balance, March 31, 2020
 
27,516

 
$
124,221

 
$
1,409,994

 
$
(10,099
)
 
$
(750,832
)
 
$
773,284

See accompanying notes to condensed consolidated financial statements.

7




LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)
(UNAUDITED)

 
 
Nine Months Ended March 31, 2019
(Amounts in thousands,
except per share data)
 
Common Stock
Outstanding
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Total
Shareholders’
Equity
 
Shares
 
Amount
 
 
 
 
 
 
 
 
Balance, June 30, 2018
 
27,488

 
$
119,232

 
$
1,279,343

 
$
(8,259
)
 
$
(738,034
)
 
$
652,282

Net income
 
 
 
 
 
39,028

 
 
 
 
 
39,028

Net pension and postretirement benefit gains, net of $13 tax effect
 
 
 
 
 
 
 
44

 
 
 
44

Cash dividends - common stock ($0.60 per share)
 
 
 
 
 
(16,495
)
 
 
 
 
 
(16,495
)
Purchase of treasury stock
 
(10
)
 
 
 
 
 
 
 
(1,593
)
 
(1,593
)
Stock-based plans
 
12

 
(778
)
 
 
 
 
 
 
 
(778
)
Stock-based compensation expense
 
 
 
1,531

 
 
 
 
 
 
 
1,531

Balance, September 30, 2018
 
27,490

 
$
119,985

 
$
1,301,876

 
$
(8,215
)
 
$
(739,627
)
 
$
674,019

Net income
 
 
 
 
 
47,907

 
 
 
 
 
47,907

Net pension and postretirement benefit gains, net of $14 tax effect
 
 
 
 
 
 
 
43

 
 
 
43

Cash dividends - common stock ($0.65 per share)
 
 
 
 
 
(17,875
)
 
 
 
 
 
(17,875
)
Purchase of treasury stock
 
(1
)
 
 
 
 
 
 
 
(166
)
 
(166
)
Stock-based plans
 
16

 
(988
)
 
 
 
 
 
 
 
(988
)
Stock-based compensation expense
 
 
 
1,831

 
 
 
 
 
 
 
1,831

Balance, December 31, 2018
 
27,505

 
$
120,828

 
$
1,331,908

 
$
(8,172
)
 
$
(739,793
)
 
$
704,771

Net income
 
 
 
 
 
30,604

 
 
 
 
 
30,604

Net pension and postretirement benefit gains, net of $13 tax effect
 
 
 
 
 
 
 
43

 
 
 
43

Cash dividends - common stock ($0.65 per share)
 
 
 
 
 
(17,874
)
 
 
 
 
 
(17,874
)
Purchase of treasury stock
 
(21
)
 
 
 
 
 
 
 
(3,273
)
 
(3,273
)
Stock-based plans
 
21

 
(443
)
 
 
 
 
 
 
 
(443
)
Stock-based compensation expense
 
 
 
1,180

 
 
 
 
 
 
 
1,180

Balance, March 31, 2019
 
27,505

 
$
121,565

 
$
1,344,638

 
$
(8,129
)
 
$
(743,066
)
 
$
715,008

See accompanying notes to condensed consolidated financial statements.

8




LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Lancaster Colony Corporation and our wholly-owned subsidiaries, collectively referred to as “we,” “us,” “our,” “registrant” or the “Company” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and SEC Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our 2019 Annual Report on Form 10-K. Unless otherwise noted, the term “year” and references to a particular year pertain to our fiscal year, which begins on July 1 and ends on June 30; for example, 2020 refers to fiscal 2020, which is the period from July 1, 2019 to June 30, 2020.
Deferred Software Costs
We capitalize certain costs related to hosting arrangements that are service contracts (cloud computing arrangements). For the nine months ended March 31, 2020, we capitalized $6.6 million of deferred software costs related to cloud computing arrangements, primarily for amounts related to our new enterprise resource planning system.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, except for those acquired as part of a business combination, which are recorded at fair value at the time of purchase. We use the straight-line method of computing depreciation for financial reporting purposes based on the estimated useful lives of the corresponding assets. Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and the change in accounts payable in the Condensed Consolidated Statements of Cash Flows were as follows: 
 
March 31,
 
2020
 
2019
Construction in progress in Accounts Payable
$
8,532

 
$
3,131


Earnings Per Share
Earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock and common stock equivalents (restricted stock and stock-settled stock appreciation rights) outstanding during each period. Unvested shares of restricted stock granted to employees are considered participating securities since employees receive nonforfeitable dividends prior to vesting and, therefore, are included in the earnings allocation in computing EPS under the two-class method. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to common shareholders by the diluted weighted average number of common shares outstanding during the period, which includes the dilutive potential common shares associated with nonparticipating restricted stock and stock-settled stock appreciation rights.


9


LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)


Basic and diluted net income per common share were calculated as follows:
 
Three Months Ended 
March 31,
 
Nine Months Ended 
March 31,
 
2020
 
2019
 
2020
 
2019
Net income
$
22,429

 
$
30,604

 
$
106,598

 
$
117,539

Net income available to participating securities
(48
)
 
(52
)
 
(216
)
 
(212
)
Net income available to common shareholders
$
22,381

 
$
30,552

 
$
106,382

 
$
117,327

 
 
 
 
 
 
 
 
Weighted average common shares outstanding – basic
27,457

 
27,448

 
27,447

 
27,436

Incremental share effect from:
 
 
 
 
 
 
 
Nonparticipating restricted stock
1

 
1

 
2

 
3

Stock-settled stock appreciation rights
43

 
100

 
53

 
104

Weighted average common shares outstanding – diluted
27,501

 
27,549

 
27,502

 
27,543

 
 
 
 
 
 
 
 
Net income per common share – basic
$
0.82

 
$
1.11

 
$
3.88

 
$
4.28

Net income per common share – diluted
$
0.81

 
$
1.11

 
$
3.87

 
$
4.26


Accumulated Other Comprehensive Loss
The following table presents the amounts reclassified out of accumulated other comprehensive loss by component:
 
Three Months Ended 
March 31,
 
Nine Months Ended 
March 31,
 
2020
 
2019
 
2020
 
2019
Accumulated other comprehensive loss at beginning of period
$
(10,169
)
 
$
(8,172
)
 
$
(10,308
)
 
$
(8,259
)
Defined Benefit Pension Plan Items:
 
 
 
 
 
 
 
Amortization of unrecognized net loss
143

 
111

 
429

 
335

Postretirement Benefit Plan Items:
 
 
 
 
 
 
 
Amortization of unrecognized net gain
(7
)
 
(9
)
 
(20
)
 
(28
)
Amortization of prior service credit
(45
)
 
(46
)
 
(136
)
 
(137
)
Total other comprehensive income, before tax
91

 
56

 
273

 
170

Total tax expense
(21
)
 
(13
)
 
(64
)
 
(40
)
Other comprehensive income, net of tax
70

 
43

 
209

 
130

Accumulated other comprehensive loss at end of period
$
(10,099
)
 
$
(8,129
)
 
$
(10,099
)
 
$
(8,129
)

Significant Accounting Policies
There were no changes to our Significant Accounting Policies from those disclosed in our 2019 Annual Report on Form 10-K. However, see expanded disclosure of lease accounting policies in Note 5 due to the adoption of new lease accounting guidance.
Recently Issued Accounting Standards
In August 2018, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to the disclosure requirements for fair value measurements. The guidance removes, modifies and adds disclosures related to fair value. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will be effective for us in fiscal 2021, including interim periods. As the guidance only relates to disclosures, there will be no impact on our financial position or results of operations.

10


LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)


Recently Adopted Accounting Standards
In February 2016, the FASB issued new accounting guidance to require lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months and issued subsequent clarifications of this new guidance. This guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease). Both lease classifications require the lessee to record a right-of-use asset and a lease liability based upon the present value of the lease payments. Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset. Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the consolidated financial statements. In July 2018, the FASB issued guidance that allows for an alternate transition method whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than restating comparative periods. We adopted the new guidance on July 1, 2019 using this alternate transition method, but we did not record a cumulative-effect adjustment from initially applying the standard. We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets. We have completed the implementation of a lease accounting system to enable the preparation of financial information and have implemented relevant accounting policies and internal controls surrounding the lease accounting process. As a result of adoption, we recognized a lease liability and right-of-use asset of $33.5 million and $31.7 million, respectively. The right-of-use asset balance reflects the reclassification of deferred rent and prepaid rent against the initial asset. The adoption did not impact our results of operations or cash flows. See additional lease disclosures in Note 5.
Note 2 – Acquisitions
Omni Baking Company LLC
On November 16, 2018, we acquired substantially all of the assets of Omni Baking Company LLC (“Omni”). Omni has been a long-time supplier of products to our frozen garlic bread operations and is based in Vineland, New Jersey. The purchase price of $22.3 million, which includes the post-closing working capital adjustment, was funded with cash on hand. Omni’s results of operations are allocated between our Retail and Foodservice segments in a manner consistent with our current segment allocations. These results have been included in our condensed consolidated financial statements from the date of acquisition.
 
 
Bantam Bagels, LLC
On October 19, 2018, we acquired all the assets of Bantam Bagels, LLC (“Bantam”). Bantam, a producer and marketer of frozen mini stuffed bagels and other frozen bread products sold to both the retail and foodservice channels, is based in New York, New York. The base purchase price of $33.1 million, which includes the post-closing working capital adjustment, was funded with cash on hand. This purchase price excludes contingent consideration relating to an additional earn-out payment which is tied to performance-based conditions. In general, the terms of the acquisition specify that the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Bantam for the twelve months ending December 31, 2023. We are unable to provide a range for the amount of this earn-out because it is based on the future adjusted EBITDA of Bantam, and the earn-out does not contain a minimum or maximum value. See further discussion of the earn-out in Note 3. Bantam’s results of operations are allocated between our Retail and Foodservice segments in a manner consistent with our current segment allocations. These results have been included in our condensed consolidated financial statements from the date of acquisition.
Note 3 – Fair Value
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows:
Level 1 – defined as observable inputs, such as quoted market prices in active markets.
Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

11


LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)


Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and equivalents, accounts receivable, accounts payable, contingent consideration payable and defined benefit pension plan assets. The estimated fair value of cash and equivalents, accounts receivable and accounts payable approximates their carrying value.
Our contingent consideration, which resulted from the earn-outs associated with our acquisitions of Bantam and Angelic Bakehouse, Inc. (“Angelic”), is measured at fair value on a recurring basis and is included in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes our contingent consideration:
 
Fair Value Measurements at March 31, 2020
 
Level 1
 
Level 2
 
Level 3
 
Total
Contingent consideration - Bantam
$

 
$

 
$
9,092

 
$
9,092

Contingent consideration - Angelic

 

 

 

Total contingent consideration
$

 
$

 
$
9,092

 
$
9,092

 
 
 
 
 
 
 
 
 
Fair Value Measurements at June 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Contingent consideration - Bantam
$

 
$

 
$
8,900

 
$
8,900

Contingent consideration - Angelic

 

 

 

Total contingent consideration
$

 
$

 
$
8,900

 
$
8,900


Bantam Contingent Consideration
This contingent consideration resulted from the earn-out associated with our October 19, 2018 acquisition of Bantam. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Bantam for the twelve months ending December 31, 2023. The initial fair value of the contingent consideration was determined to be $8.0 million, which included a refinement to the purchase price allocation in the prior-year third quarter related to a change in assumptions. The fair value is measured on a recurring basis using a Monte Carlo simulation that randomly changes revenue growth, forecasted adjusted EBITDA and other uncertain variables to estimate an expected value. We record the present value of this amount by applying a discount rate. As this fair value measurement is based on significant inputs not observable in the market, it represents a Level 3 measurement within the fair value hierarchy.
The following table represents our Level 3 fair value measurements using significant other unobservable inputs for Bantam’s contingent consideration:
 
Three Months Ended 
March 31,
 
Nine Months Ended 
March 31,
 
2020
 
2019
 
2020
 
2019
Contingent consideration at beginning of period
$
9,027

 
$
8,995

 
$
8,900

 
$

Initial fair value - (reductions)/additions

 
(900
)
 

 
8,000

Change in contingent consideration included in operating income
65

 
88

 
192

 
183

Contingent consideration at end of period
$
9,092

 
$
8,183

 
$
9,092

 
$
8,183


Angelic Contingent Consideration
This contingent consideration resulted from the earn-out associated with our November 17, 2016 acquisition of Angelic. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Angelic for fiscal 2021. The initial fair value of the contingent consideration was determined to be $13.9 million. The fair value is measured on a recurring basis using a present value approach, which incorporates factors such as revenue growth and forecasted adjusted EBITDA, to estimate an expected value. We record the present value of this amount by applying a discount rate. As this fair value measurement is based on significant inputs not observable in the market, it represents a Level 3 measurement within the fair value hierarchy. Our 2019 fair value measurements resulted in a $9.7 million reduction in the fair value of Angelic’s contingent consideration in the second quarter ended December 31, 2018 and a $7.4 million reduction in the fourth quarter ended June 30, 2019 based on changes in Angelic’s forecasted adjusted EBITDA for fiscal 2021. These adjustments were recorded in our Retail segment.

12


LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)


The following table represents our Level 3 fair value measurements using significant other unobservable inputs for Angelic’s contingent consideration:
 
Three Months Ended 
March 31,
 
Nine Months Ended 
March 31,
 
2020
 
2019
 
2020
 
2019
Contingent consideration at beginning of period
$

 
$
7,380

 
$

 
$
17,080

Change in contingent consideration included in operating income

 

 

 
(9,700
)
Contingent consideration at end of period
$

 
$
7,380

 
$

 
$
7,380


Note 4 – Long-Term Debt
At June 30, 2019, we had an unsecured credit facility under which we could borrow, on a revolving credit basis, up to a maximum of $150 million at any one time, with potential to expand the total credit availability to $225 million subject to us obtaining consent of the issuing banks and certain other conditions.
On March 19, 2020, in the ordinary course of business, we entered into a new unsecured revolving credit facility (“New Credit Facility”), replacing the facility discussed above which was to expire in April 2021. The material terms and covenants of the New Credit Facility are substantially similar to our previous credit facility.
The New Credit Facility provides that we may borrow, on a revolving credit basis, up to a maximum of $150 million at any one time, with potential to expand the total credit availability to $225 million based on consent of the issuing banks and certain other conditions. The New Credit Facility expires on March 19, 2025, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to LIBOR or an alternate base rate defined in the New Credit Facility. In the event that LIBOR becomes unavailable or is no longer deemed an appropriate reference rate, the New Credit Facility allows for the use of a benchmark replacement rate. We must also pay facility fees that are tied to our then-applicable consolidated leverage ratio. Loans may be used for general corporate purposes. Due to the nature of its terms, when we have outstanding borrowings under the New Credit Facility, they will be classified as long-term debt.
At March 31, 2020 and June 30, 2019, we had no borrowings outstanding under these facilities. At March 31, 2020 and June 30, 2019, we had $2.8 million and $5.1 million, respectively, of standby letters of credit outstanding, which reduced the amount available for borrowing under these facilities. We paid no interest for the three and nine months ended March 31, 2020 and 2019.
The New Credit Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions. There are two principal financial covenants: an interest expense test that requires us to maintain an interest coverage ratio not less than 2.5 to 1 at the end of each fiscal quarter; and an indebtedness test that requires us to maintain a consolidated leverage ratio not greater than 3.5 to 1, subject to certain exceptions. The interest coverage ratio is calculated by dividing Consolidated EBIT by Consolidated Interest Expense, and the leverage ratio is calculated by dividing Consolidated Net Debt by Consolidated EBITDA. All financial terms used in the covenant calculations are defined more specifically in the New Credit Facility.
Note 5 – Leases
General Lease Description
We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from 1 year to 8 years.
We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from 3