Lancaster Colony Corporation (Nasdaq: LANC) today reported
results for the company’s fiscal third quarter ended March 31,
2023.
Summary
- Consolidated net sales increased 15.2% to a third quarter
record $464.9 million versus $403.5 million last year. Retail net
sales advanced 16.0% to $247.2 million while Foodservice net sales
grew 14.4% to $217.7 million.
- Consolidated gross profit increased $25.9 million, or 37.9%, to
$94.2 million. Third quarter gross margin improved to 20.3%, an
increase of 330 basis points from last year’s third quarter.
- Consolidated operating income was $29.4 million compared to an
operating loss of $7.6 million last year. Prior-year operating
income was unfavorably impacted by a restructuring and impairment
charge of $22.7 million.
- Net income was $0.89 per diluted share versus a net loss of
$0.17 per diluted share last year. The restructuring and impairment
charge reduced last year’s net income by $0.63 per diluted
share.
CEO David A. Ciesinski commented, “We were pleased to report
another quarter of record sales and higher profits. In the Retail
segment, beyond the favorable impact of our pricing actions, net
sales growth of 16.0% includes strong volume growth of 6.1% driven
by our successful program for licensed dressings and sauces and
another solid quarter for our New York BRAND Bakery® frozen garlic
bread products. Retail net sales also reflect a modest benefit from
a favorable shift in the timing of shipments in advance of the
Easter holiday. In our Foodservice segment, net sales growth of
14.4% reflects the benefit of inflationary pricing, increased
demand from several of our national chain restaurant customers, and
improved sales volumes for our branded Foodservice products.”
“While we continued to experience significant cost inflation,
the pricing actions we have implemented in both our Retail and
Foodservice segments served to offset the higher input costs. The
$25.9 million increase in gross profit reflects the pricing and
continued progress in our management of manufacturing costs along
with a more stable and predictable operating environment. In our
fiscal third quarter, we successfully added our largest dressing
and sauce facility in Horse Cave, Kentucky to our new ERP system as
we completed the Wave 3 implementation phase of our ERP initiative,
Project Ascent. As anticipated, the ERP implementation reduced our
reported gross profit as production at that facility was
unfavorably impacted by the system cutover process.”
“Looking ahead to our fiscal fourth quarter, we anticipate
Retail sales will continue to benefit from our licensing program,
including incremental growth from the new products, flavors, and
sizes we have introduced this fiscal year. In the Foodservice
segment, we expect sustained volume growth from select customers in
our mix of national chain restaurant accounts. Consolidated net
sales will compare to last year’s fourth quarter that benefited
from an estimated $25 million in incremental net sales attributed
to advance customer orders ahead of our July 1 ERP go-live date for
Wave 1. Cost inflation will remain a headwind to our financial
results, but the pricing actions we have in place along with our
cost savings initiatives are expected to offset the increased
costs.”
Third Quarter Results
Consolidated net sales increased 15.2% to a third quarter record
$464.9 million versus $403.5 million last year. Retail segment net
sales grew 16.0% to $247.2 million, including the favorable impact
of our pricing actions. Retail segment sales volume, measured in
pounds shipped, increased 6.1%. Retail sales volume growth was
driven by the continued success of our program for licensed
dressings and sauces. Our New York BRAND Bakery® frozen garlic
bread products also contributed to the increase in the Retail sales
volume. In the Foodservice segment, net sales improved 14.4% to
$217.7 million as inflationary pricing combined with increased
demand from several of our national chain restaurant account
customers and growth for our branded Foodservice products led the
segment’s sales higher. Foodservice sales volume, measured in
pounds shipped, increased 0.4%.
Consolidated gross profit increased $25.9 million, or 37.9%, to
$94.2 million as our pricing actions effectively offset the
significant inflationary costs we have experienced for commodities,
packaging, labor and warehousing. The higher gross profit also
reflects improved manufacturing efficiencies, cost savings
initiatives and the benefit of a more stable operating environment
partially offset by the impact of the Wave 3 implementation phase
of Project Ascent as our dressing and sauce production facility in
Horse Cave, Kentucky transitioned to our new ERP system in early
February as planned. The current-year gross profit compares to a
very challenging year-ago quarter characterized by escalating
inflationary costs across our entire supply chain, increased costs
to service the shifting demands of our business, and shortages of
select ingredients and packaging supplies.
SG&A expenses increased $10.3 million to $64.8 million,
which reflects higher expenditures to support the continued growth
of our business including investments in personnel and consumer
promotions in addition to higher brokerage costs associated with
the increased sales. SG&A expenses also include some
nonrecurring legal charges for closed operations. Expenditures for
Project Ascent, our ERP initiative, totaled $7.6 million in the
current-year quarter versus $10.3 million last year.
In the prior-year quarter, the change in contingent
consideration reflected the favorable impact of a $1.3 million
noncash reduction to the fair value of the contingent consideration
for Bantam Bagels in addition to noncash restructuring and
impairment charges of $22.7 million for that business, which the
company ultimately exited near the end of our fiscal fourth quarter
ended June 30, 2022.
Consolidated operating income of $29.4 million compares to an
operating loss of $7.6 million in the prior-year quarter. The
increase in operating income was driven by the higher gross profit
and the impact of last year’s restructuring and impairment charges,
partially offset by the increase in SG&A expenses.
Net income of $24.6 million, or $0.89 per diluted share,
compares to a net loss of $4.5 million, or a net loss of $0.17 per
diluted share, last year. In the current-year quarter, expenditures
for Project Ascent reduced net income by $5.9 million, or $0.21 per
diluted share. Net income and earnings per diluted share in the
current quarter benefited from a lower overall effective tax rate.
In the prior-year quarter, the restructuring and impairment charges
reduced net income by $17.4 million, or $0.63 per diluted share;
expenditures for Project Ascent reduced net income by $7.9 million,
or $0.29 per diluted share; and the adjustment to the contingent
consideration increased net income by $1.0 million, or $0.04 per
diluted share.
Fiscal Year-to-Date Results
For the nine months ended March 31, 2023, net sales increased
11.8% to $1.37 billion compared to $1.22 billion a year ago. Net
income for the nine-month period totaled $102.1 million, or $3.71
per diluted share, versus the prior-year amount of $60.5 million,
or $2.20 per diluted share. In the current-year period, spend for
Project Ascent decreased net income by $18.7 million, or $0.68 per
diluted share. In the prior-year period, spend for Project Ascent
decreased net income by $21.6 million, or $0.79 per diluted share;
restructuring and impairment charges reduced net income by $18.8
million, or $0.68 per diluted share; and the change in contingent
consideration increased net income by $2.7 million, or $0.10 per
diluted share.
Conference Call on the Web
The company’s third quarter conference call is scheduled for
this morning, May 4, at 10:00 a.m. ET. Access to a live webcast of
the call is available 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’s 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:
- inflationary pressures resulting in higher input costs;
- the reaction of customers or consumers to pricing actions we
take to offset inflationary costs;
- efficiencies in plant operations and our overall supply chain
network;
- complexities related to the implementation of our new
enterprise resource planning system;
- adequate supply of labor for our manufacturing facilities;
- adverse changes in freight, energy or other costs of producing,
distributing or transporting our products;
- the impact of customer store brands on our branded retail
volumes;
- fluctuations in the cost and availability of ingredients and
packaging;
- dependence on contract manufacturers, distributors and freight
transporters, including their operational capacity and financial
strength in continuing to support our business;
- price and product competition;
- stability of labor relations;
- dependence on key personnel and changes in key personnel;
- cyber-security incidents, information technology disruptions,
and data breaches;
- capacity constraints that may affect our ability to meet demand
or may increase our costs;
- geopolitical events, such as Russia’s invasion of Ukraine, that
could create unforeseen business disruptions and impact the cost or
availability of raw materials and energy;
- the potential for loss of larger programs, including licensing
agreements, or key customer relationships;
- significant shifts in consumer demand and disruptions to our
employees, communities, customers, supply chains, production
planning, operations, and production processes resulting from the
impacts of epidemics, pandemics or similar widespread public health
concerns and disease outbreaks;
- changes in demand for our products, which may result from loss
of brand reputation or customer goodwill;
- the possible occurrence of product recalls or other defective
or mislabeled product costs;
- the success and cost of new product development efforts;
- the lack of market acceptance of new products;
- the extent to which business acquisitions are completed and
acceptably integrated;
- the ability to successfully grow acquired businesses;
- the effect of consolidation of customers within key market
channels;
- maintenance of competitive position with respect to other
manufacturers;
- the outcome of any litigation or arbitration;
- 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 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
March 31,
Nine Months Ended
March 31,
2023
2022
2023
2022
Net sales
$
464,935
$
403,494
$
1,367,866
$
1,223,977
Cost of sales
370,698
335,162
1,072,472
966,676
Gross profit
94,237
68,332
295,394
257,301
Selling, general & administrative
expenses
64,829
54,526
165,361
157,920
Change in contingent consideration
—
(1,300
)
—
(3,470
)
Restructuring and impairment charges
—
22,723
—
24,651
Operating income (loss)
29,408
(7,617
)
130,033
78,200
Other, net
607
119
815
250
Income (loss) before income taxes
30,015
(7,498
)
130,848
78,450
Taxes based on income (loss)
5,460
(3,015
)
28,728
17,908
Net income (loss)
$
24,555
$
(4,483
)
$
102,120
$
60,542
Net income (loss) per common share:
(a)
Basic and diluted
$
0.89
$
(0.17
)
$
3.71
$
2.20
Cash dividends per common share
$
0.85
$
0.80
$
2.50
$
2.35
Weighted average common shares
outstanding:
Basic
27,465
27,442
27,462
27,448
Diluted
27,487
27,442
27,479
27,478
(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
March 31,
Nine Months Ended
March 31,
2023
2022
2023
2022
NET SALES
Retail
$
247,208
$
213,128
$
729,187
$
682,102
Foodservice
217,727
190,366
638,679
541,875
Total Net Sales
$
464,935
$
403,494
$
1,367,866
$
1,223,977
OPERATING INCOME
(LOSS)
Retail
$
36,943
$
22,213
$
129,195
$
119,997
Foodservice
22,405
18,556
81,030
52,690
Nonallocated Restructuring and Impairment
Charges
—
(22,723
)
—
(23,749
)
Corporate Expenses
(29,940
)
(25,663
)
(80,192
)
(70,738
)
Total Operating Income (Loss)
$
29,408
$
(7,617
)
$
130,033
$
78,200
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited)
(In thousands)
March 31, 2023
June 30, 2022
ASSETS
Current assets:
Cash and equivalents
$
82,861
$
60,283
Receivables
130,506
135,496
Inventories
154,753
144,702
Other current assets
23,440
11,300
Total current assets
391,560
351,781
Net property, plant and equipment
485,038
451,368
Other assets
281,159
287,225
Total assets
$
1,157,757
$
1,090,374
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
138,450
$
114,972
Accrued liabilities
58,001
50,613
Total current liabilities
196,451
165,585
Noncurrent liabilities and deferred income
taxes
88,122
80,102
Shareholders’ equity
873,184
844,687
Total liabilities and shareholders’
equity
$
1,157,757
$
1,090,374
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005796/en/
Dale N. Ganobsik Vice President, Corporate Finance and Investor
Relations Lancaster Colony Corporation Phone: 614/224-7141 Email:
ir@lancastercolony.com
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