WESTERVILLE, Ohio,
Jan. 25, 2018 /PRNewswire/ -- Lancaster Colony
Corporation (Nasdaq: LANC) today reported results for the company's
fiscal second quarter ended December 31, 2017.
Highlights for the quarter are as follows:
- Consolidated net sales decreased 2.2% to $319.7 million versus $326.8 million last year.
- Retail net sales declined 1.9% to $179.3
million as continued growth for Olive Garden®
dressings, a full quarter of sales contribution from Angelic Bakehouse, reduced trade spending and
lower coupon expenses were more than offset by the impact of
disruptions in the production and supply of our New York
BRAND® Bakery frozen garlic breads and a slowdown in
late-December outbound shipments due to insufficient freight
capacity.
- Foodservice net sales decreased 2.5% to $140.4 million driven by the ongoing challenges
of diminished customer traffic and lower same-store sales in the
U.S. restaurant industry. Sales to our national chain restaurant
accounts, including limited-time-offer programs, were below the
prior-year amount, partially offset by inflationary pricing.
Consistent with the Retail segment, late-December outbound
shipments of products to Foodservice customers were slowed by
insufficient freight capacity.
- Consolidated gross profit declined $9.8
million to $83.9 million
driven by the impact of the lower sales volume, notably higher
commodity costs and increased freight costs. Savings realized from
our lean six sigma program and inflationary Foodservice pricing
served to partially offset these costs. Note that the prior-year
results reflect the benefit of significantly lower ingredient costs
with only a modest offset from deflationary pricing which, combined
with the lower freight costs, led to last year's record-high gross
profit in the second fiscal quarter. Selling, general and
administrative expenses increased $2.3
million driven by increased amortization and other recurring
noncash charges attributed to Angelic
Bakehouse, continued investments in business growth
initiatives and a favorable non-recurring item in the prior-year's
corporate expenses related to closed business operations.
- Consolidated operating income declined to $47.3 million from $59.4
million in the prior year on the lower gross profit and
increased SG&A expenses. The Retail and Foodservice segments
were unfavorably influenced by the factors referenced above,
resulting in operating margin declines from 23.5% to 20.8% in
Retail and from 13.3% to 9.6% in Foodservice.
- Net income was $45.9 million, or
$1.67 per diluted share, compared to
$39.0 million, or $1.42 per diluted share, last year. The taxes
based on income amount of only $1.8
million in the current-year quarter reflects the favorable
impact of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), which
includes the cumulative effect of both a lower federal income tax
rate and a one-time benefit of $9
million resulting from the preliminary re-measurement of our
net deferred tax liability. The estimated favorable impact of the
Tax Act on second quarter net income was $14.5 million, or $.53 per diluted share.
- The regular quarterly cash dividend paid on December 29, 2017 was $.60 per share, a nine percent increase over last
year's amount. The company's balance sheet remained debt free on
December 31, 2017 with $178.8 million in cash and equivalents.
For the six months ended December 31,
2017, net sales were nearly flat at $618.6 million compared to $618.1 million a year ago. Including the
beneficial impacts of the Tax Act, net income for the six-month
period totaled $75.3 million, or
$2.74 per diluted share, versus the
prior-year amount of $72.4 million,
or $2.63 per diluted share.
Based on the Tax Act's lower federal income tax rate and excluding
the one-time benefit of $9 million
resulting from the preliminary re-measurement of our net deferred
tax liability, the year-to-date effective tax rate was reduced to
28.3% to reflect the blended tax rate for the full fiscal year
ending June 30, 2018.
CEO David A. Ciesinski commented,
"Our fiscal second quarter was marked by several challenges
including a shortfall in our projected net sales with the
production and supply disruption for our New York BRAND®
Bakery frozen garlic breads notably impacting our Retail segment
results. The continued slowdown in away from home dining and lower
levels of limited-time-offer program volumes combined to impact our
Foodservice business. The net sales declines were compounded
by commodity cost headwinds and increased freight costs. We
are implementing corrective actions to recover and meet demand for
the frozen garlic bread products, but nonetheless expect those
sales to remain constrained through the end of our fiscal third
quarter. With regard to commodity and freight costs, while we
anticipate some reduction from the very high levels we experienced
in the second quarter, we expect these costs to remain above last
year's level for the balance of our fiscal year. Early in our
fiscal third quarter, selective price increases were implemented in
both our Retail and Foodservice segments in response to the higher
commodity and freight costs. Additional Retail price
increases are planned for early in the fourth quarter of our fiscal
year. We will also continue to generate cost savings from our
lean six sigma program to help offset the higher commodity and
freight expenses.
On the sales volume front, we will address our challenges
through improved execution and new product introductions. For
example, late in our fiscal second quarter we were excited to
introduce a 3-pack of Buffalo Wild Wings® sauces to the
retail club store channel under a license agreement with Buffalo
Wild Wings as part of a retail test for their brand. In
the coming months we will add a Parmesan Ranch flavor to our Retail
segment's line of Olive Garden® dressings. Note
that this year's earlier Easter holiday will also shift some sales
into our fiscal third quarter."
Conference Call on the Web
The company's second quarter conference call is scheduled for
this morning, January 25, 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 reaction of customers or consumers to price increases we
may implement;
- capacity constraints that may affect our ability to meet
demand or may increase our costs;
- dependence on contract manufacturers, distributors and
freight transporters;
- fluctuations in the cost and availability of ingredients and
packaging;
- adverse changes in freight, energy or other costs of
producing, distributing or transporting our products;
- price and product competition;
- the impact of customer store brands on our branded retail
volumes;
- the success and cost of new product development
efforts;
- dependence on key personnel and changes in key
personnel;
- the effect of consolidation of customers within key market
channels;
- the lack of market acceptance of new products;
- the ability to successfully grow recently acquired
businesses;
- the extent to which future business acquisitions are
completed and acceptably integrated;
- the possible occurrence of product recalls or other
defective or mislabeled product costs;
- the potential for loss of larger programs or key customer
relationships;
- changes in demand for our products, which may result from
loss of brand reputation or customer goodwill;
- maintenance of competitive position with respect to other
manufacturers;
- efficiencies in plant operations;
- the impact of any regulatory matters affecting our food
business, including any required labeling changes and their impact
on consumer demand;
- stability of labor relations;
- the outcome of any litigation or arbitration;
- 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;
- changes in estimates in critical accounting judgments;
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,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$
|
319,665
|
|
|
$
|
326,773
|
|
|
$
|
618,581
|
|
|
$
|
618,134
|
|
Cost of
sales
|
235,724
|
|
|
233,034
|
|
|
459,163
|
|
|
443,761
|
|
Gross
profit
|
83,941
|
|
|
93,739
|
|
|
159,418
|
|
|
174,373
|
|
Selling, general
& administrative expenses
|
36,676
|
|
|
34,381
|
|
|
67,827
|
|
|
64,261
|
|
Operating
income
|
47,265
|
|
|
59,358
|
|
|
91,591
|
|
|
110,112
|
|
Other, net
|
412
|
|
|
206
|
|
|
770
|
|
|
293
|
|
Income before income
taxes
|
47,677
|
|
|
59,564
|
|
|
92,361
|
|
|
110,405
|
|
Taxes based on
income
|
1,757
|
|
|
20,608
|
|
|
17,055
|
|
|
38,049
|
|
Net income
|
$
|
45,920
|
|
|
$
|
38,956
|
|
|
$
|
75,306
|
|
|
$
|
72,356
|
|
|
|
|
|
|
|
|
|
Net income per common
share: (a)
|
|
|
|
|
|
|
|
Basic
|
$
|
1.67
|
|
|
$
|
1.42
|
|
|
$
|
2.74
|
|
|
$
|
2.64
|
|
Diluted
|
$
|
1.67
|
|
|
$
|
1.42
|
|
|
$
|
2.74
|
|
|
$
|
2.63
|
|
|
|
|
|
|
|
|
|
Cash dividends per
common share
|
$
|
0.60
|
|
|
$
|
0.55
|
|
|
$
|
1.15
|
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
27,396
|
|
|
27,366
|
|
|
27,396
|
|
|
27,364
|
|
Diluted
|
27,460
|
|
|
27,441
|
|
|
27,456
|
|
|
27,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
NET SALES
|
|
|
|
|
|
|
|
Retail
|
$
|
179,286
|
|
|
$
|
182,794
|
|
|
$
|
341,430
|
|
|
$
|
335,456
|
|
Foodservice
|
140,379
|
|
|
143,979
|
|
|
277,151
|
|
|
282,678
|
|
Total Net
Sales
|
$
|
319,665
|
|
|
$
|
326,773
|
|
|
$
|
618,581
|
|
|
$
|
618,134
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
|
|
|
|
|
Retail
|
$
|
37,316
|
|
|
$
|
42,905
|
|
|
$
|
70,183
|
|
|
$
|
77,711
|
|
Foodservice
|
13,409
|
|
|
19,147
|
|
|
28,097
|
|
|
39,166
|
|
Corporate
expenses
|
(3,460)
|
|
|
(2,694)
|
|
|
(6,689)
|
|
|
(6,765)
|
|
Total Operating
Income
|
$
|
47,265
|
|
|
$
|
59,358
|
|
|
$
|
91,591
|
|
|
$
|
110,112
|
|
LANCASTER COLONY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
|
(In
thousands)
|
|
|
|
December 31,
2017
|
|
June 30,
2017
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
178,767
|
|
|
$
|
143,104
|
|
Receivables
|
68,360
|
|
|
69,922
|
|
Inventories
|
77,659
|
|
|
76,376
|
|
Other current
assets
|
18,311
|
|
|
11,744
|
|
Total current
assets
|
343,097
|
|
|
301,146
|
|
Net property, plant
and equipment
|
185,018
|
|
|
180,671
|
|
Other
assets
|
236,361
|
|
|
234,588
|
|
Total
assets
|
$
|
764,476
|
|
|
$
|
716,405
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
52,579
|
|
|
$
|
41,353
|
|
Accrued
liabilities
|
32,490
|
|
|
35,270
|
|
Total current
liabilities
|
85,069
|
|
|
76,623
|
|
Other noncurrent
liabilities and deferred income taxes
|
58,398
|
|
|
63,805
|
|
Shareholders'
equity
|
621,009
|
|
|
575,977
|
|
Total liabilities and
shareholders' equity
|
$
|
764,476
|
|
|
$
|
716,405
|
|
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SOURCE Lancaster Colony Corporation