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Lancaster Colony Reports Second Quarter Sales And Earnings

WESTERVILLE, Ohio, Feb. 4, 2020 /PRNewswire/ -- Lancaster Colony Corporation (Nasdaq: LANC) today reported results for the company's fiscal second quarter ended December 31, 2019.  Highlights for the quarter are as follows:

  • Consolidated net sales increased 1.6% to a second quarter record $355.1 million versus $349.6 million last year.
  • Consolidated gross profit grew $8.5 million, or 9.3%, to $99.9 million driven by our cost savings programs, lower commodity costs, improved net price realization and a more favorable Foodservice segment sales mix.
  • Retail net sales were flat at $186.2 million compared to $186.3 million in the prior year. Retail net sales benefited from favorable net price realization in addition to increased sales of frozen garlic bread and continued volume gains for shelf-stable dressings and sauces sold under license agreements. Notable offsets to Retail growth included reduced sales of our Marzetti® caramel dips and produce dressings that were impacted by the timing of shipments between the first and second quarter.
  • Foodservice net sales grew 3.4% to $168.9 million. Excluding all sales resulting from the November 16, 2018 acquisition of Omni Baking Company, Foodservice net sales improved 2.0% driven by higher sales of our branded products and continued growth for Bantam Bagels. Omni Baking sales attributed to a temporary supply agreement totaled $6.3 million in the current-year quarter compared to $3.8 million in the prior-year quarter.
  • SG&A expenses increased $5.9 million to $45.7 million primarily driven by $4.9 million in spend for our ERP initiative.
  • Consolidated operating income declined $7.1 million to $54.1 million as influenced by the current year's $4.9 million in ERP expenses and the prior year's favorable $9.7 million non-cash reduction to the contingent consideration for Angelic Bakehouse, Inc. ("AB Adjustment"). Retail segment operating income declined $5.8 million to $39.0 million as the entire $9.7 million AB Adjustment was included in the segment's prior-year results. Foodservice segment operating income increased $4.0 million to $23.4 million.
  • Net income declined $4.5 million to $43.4 million. Current-year ERP expenses decreased net income by $3.7 million and the AB Adjustment increased prior-year net income by $7.4 million.
  • Net income per diluted share decreased $0.15 to $1.58. Current-year ERP expenses reduced net income per diluted share by $0.14 and the AB Adjustment increased prior-year net income per diluted share by $0.27.
  • The regular quarterly cash dividend paid on December 31, 2019 was $0.70 per share, an 8% increase over last year's $0.65 per share. The company's balance sheet remained debt free on December 31, 2019 with $202.2 million in cash and equivalents.

For the six months ended December 31, 2019, net sales increased 3.9% to $692.2 million compared to $666.2 million a year ago.  Net income for the six-month period totaled $84.2 million, or $3.06 per diluted share, versus the prior-year amount of $86.9 million, or $3.15 per diluted share.  In the current-year period, spend for the ERP initiative decreased net income by $5.8 million, or $0.21 per diluted share, and restructuring and impairment charges reduced net income by $0.7 million, or $0.02 per diluted share.  The AB Adjustment increased prior-year net income by $7.4 million, or $0.27 per diluted share.

CEO David A. Ciesinski commented, "We were pleased to report another quarter of record sales and strong gross margin improvement.  Cost-saving initiatives in strategic procurement, transportation and distribution along with lower commodity costs and improved net price realization helped drive our consolidated gross margin up 200 basis points to 28.1%."

"Looking ahead to the second half of our fiscal year, we will remain focused on our core strategic initiatives to grow our base business and reduce costs throughout our supply chain.  We are also very excited to share that in the coming months we will be launching new products sold to the retail channel under license agreements with a growing number of our national chain restaurant customers.  Finally, our ERP initiative is progressing as planned with design phase work well underway and initial deployment expected to commence in the first half of fiscal 2021."

Conference Call on the Web

The company's second quarter conference call is scheduled for this morning, February 4, at 10:00 a.m. ET.  You may access a live webcast of the call through a link on the company's Internet home page at www.lancastercolony.com.  A replay of the webcast will also be made available on the company website.

About the Company

Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels.

Forward-Looking Statements

We desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). This news release contains various "forward-looking statements" within the meaning of the PSLRA and other applicable securities laws. Such statements can be identified by the use of the forward-looking words "anticipate," "estimate," "project," "believe," "intend," "plan," "expect," "hope" or similar words. These statements discuss future expectations; contain projections regarding future developments, operations or financial conditions; or state other forward-looking information. Such statements are based upon assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, expected future developments; and other factors we believe to be appropriate. These forward-looking statements involve various important risks, uncertainties and other factors, many of which are beyond our control, which could cause our actual results to differ materially from those expressed in the forward-looking statements. Some of the key factors that could cause actual results to differ materially from those expressed in the forward-looking statements include:

  • the ability to successfully grow recently acquired businesses;
  • the extent to which recent and future business acquisitions are completed and acceptably integrated;
  • difficulties in designing and implementing our new enterprise resource planning system;
  • cyber-security incidents, information technology disruptions, and data breaches;
  • price and product competition;
  • the lack of market acceptance of new products;
  • the success and cost of new product development efforts;
  • the potential for loss of larger programs or key customer relationships;
  • fluctuations in the cost and availability of ingredients and packaging;
  • the impact of customer store brands on our branded retail volumes;
  • the reaction of customers or consumers to price increases we may implement;
  • adverse changes in freight, energy or other costs of producing, distributing or transporting our products;
  • dependence on contract manufacturers, distributors and freight transporters;
  • stability of labor relations;
  • changes in demand for our products, which may result from loss of brand reputation or customer goodwill;
  • dependence on key personnel and changes in key personnel;
  • the effect of consolidation of customers within key market channels;
  • the possible occurrence of product recalls or other defective or mislabeled product costs;
  • capacity constraints that may affect our ability to meet demand or may increase our costs;
  • maintenance of competitive position with respect to other manufacturers;
  • changes in estimates in critical accounting judgments;
  • the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand;
  • the outcome of any litigation or arbitration;
  • efficiencies in plant operations;
  • adequate supply of skilled labor;
  • the impact, if any, of certain contingent liabilities associated with our withdrawal from a multiemployer pension plan;
  • the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and
  • risks related to other factors described under "Risk Factors" in other reports and statements filed by us with the Securities and Exchange Commission, including without limitation our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q (available at www.sec.gov).

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update such forward-looking statements, except as required by law. Management believes these forward-looking statements to be reasonable; however, you should not place undue reliance on statements that are based on current expectations.

LANCASTER COLONY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands except per-share amounts)



Three Months Ended
December 31,


Six Months Ended
December 31,


2019


2018


2019


2018

Net sales

$

355,117



$

349,581



$

692,171



$

666,235


Cost of sales

255,228



258,189



500,174



493,644


Gross profit

99,889



91,392



191,997



172,591


Selling, general & administrative expenses

45,747



39,842



85,202



71,921


Change in contingent consideration

64



(9,605)



127



(9,605)


Restructuring and impairment charges





886




Operating income

54,078



61,155



105,782



110,275


Other, net

877



1,039



2,304



2,353


Income before income taxes

54,955



62,194



108,086



112,628


Taxes based on income

11,531



14,287



23,917



25,693


Net income

$

43,424



$

47,907



$

84,169



$

86,935










Net income per common share: (a)








Basic

$

1.58



$

1.74



$

3.06



$

3.16


Diluted

$

1.58



$

1.73



$

3.06



$

3.15










Cash dividends per common share

$

0.70



$

0.65



$

1.35



$

1.25










Weighted average common shares outstanding:








Basic

27,443



27,435



27,443



27,429


Diluted

27,489



27,566



27,503



27,540



(a)

Based on the weighted average number of shares outstanding during each period.

 

LANCASTER COLONY CORPORATION

BUSINESS SEGMENT INFORMATION (Unaudited)

(In thousands)



Three Months Ended
December 31,


Six Months Ended
December 31,


2019


2018


2019


2018

NET SALES








Retail

$

186,210



$

186,302



$

352,287



$

349,050


Foodservice

168,907



163,279



339,884



317,185


Total Net Sales

$

355,117



$

349,581



$

692,171



$

666,235










OPERATING INCOME








Retail

$

39,017



$

44,785



$

74,452



$

78,733


Foodservice

23,416



19,405



47,205



38,266


Restructuring and Impairment Charges





(886)




Corporate Expenses

(8,355)



(3,035)



(14,989)



(6,724)


Total Operating Income

$

54,078



$

61,155



$

105,782



$

110,275


 

LANCASTER COLONY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)



December 31,
2019


June 30,
2019

ASSETS




Current assets:




Cash and equivalents

$

202,226



$

196,288


Receivables

77,061



75,691


Inventories

90,483



86,072


Other current assets

10,503



10,518


Total current assets

380,273



368,569


Net property, plant and equipment

290,971



247,044


Other assets

312,459



289,786


Total assets

$

983,703



$

905,399


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

86,151



$

76,670


Accrued liabilities

47,135



43,036


Total current liabilities

133,286



119,706


Noncurrent liabilities and deferred income taxes

77,659



58,820


Shareholders' equity

772,758



726,873


Total liabilities and shareholders' equity

$

983,703



$

905,399


 

SOURCE Lancaster Colony Corporation