Lancaster Colony Corporation (Nasdaq: LANC) today reported
results for the company’s fiscal fourth quarter and fiscal year
ended June 30, 2023.
Summary
- Consolidated fourth quarter net sales increased 0.5% to a
fourth quarter record $454.7 million. Retail segment net sales grew
1.3% in the quarter to $236.2 million while Foodservice segment net
sales declined 0.4% to $218.5 million. Last year’s fourth quarter
included an estimated $25 million in incremental net sales, or 6%
of the quarter’s total sales, attributed to advance customer orders
ahead of our July 1, 2022 ERP go-live date.
- Consolidated fourth quarter gross profit decreased $5.2 million
to $93.2 million. In the prior-year quarter, advance customer
orders ahead of our ERP go-live accounted for approximately $5
million in incremental gross profit. This year’s fourth quarter
gross profit was unfavorably impacted by startup costs at our
dressing and sauce facility in Horse Cave, Kentucky; temporary
production inefficiencies associated with our ERP implementation;
and costs associated with a Retail product line that was
discontinued.
- Consolidated fourth quarter operating income declined $22.2
million to $11.5 million. Noncash impairment charges reduced this
year’s fourth quarter operating income by $25.0 million.
Restructuring and impairment charges totaled $10.5 million in last
year’s fourth quarter.
- Fourth quarter net income was $0.33 per diluted share versus
$1.06 per diluted share last year. Impairment charges reduced
fourth quarter net income by $0.70 per diluted share. Last year’s
restructuring and impairment charges reduced net income by $0.29
per diluted share.
CEO David A. Ciesinski commented, “We reported another quarter
of record sales. In addition to inflationary pricing, the $3.1
million increase in Retail segment net sales was driven by our
licensing program, including incremental growth from the new
products, flavors and sizes we added to the program throughout the
year. Circana data, which tracks consumer purchases, showed that
consumption for our Retail segment’s branded products, measured in
pounds, was up 4.7% in the quarter, led by our licensing program.
In the prior-year quarter, Retail sales benefited from an estimated
$11 million in advance customer orders ahead of our ERP go-live.
The modest $0.8 million decline in Foodservice segment sales
compares to a significant increase of 28.1% last year which
included an estimated $14 million in advance customer orders.
Foodservice segment sales were also unfavorably impacted by slower
traffic for some of our national chain restaurant account
customers.”
“The fourth quarter gross profit results fell short of our
expectations as we experienced some transitory costs associated
with our long-term strategic investments in production capacity and
our ERP network. These issues have now been remedied, and we look
forward to the many benefits these investments will provide our
business in the years ahead.”
“Looking ahead to fiscal 2024, we anticipate Retail segment
sales will benefit from volume growth led by our licensing program,
including incremental growth from the new products, flavors and
sizes we introduced in fiscal 2023. We are also excited to share
our plans to add Texas RoadhouseTM steak sauces to our licensing
program with a spring launch date. In addition, we foresee
continued positive momentum for our New York BRAND® Bakery frozen
garlic bread products. In Foodservice, we expect sales volumes to
be led by growth from select quick-service restaurant customers in
our mix of national chain restaurant accounts, while external
factors, including U.S. economic performance and potential changes
in consumer sentiment, may impact demand. Consolidated net sales
will also continue to benefit from the pricing actions taken in
fiscal 2023.”
“We project the impact of inflationary costs to subside notably
in the coming year. The pricing actions we have implemented along
with our cost savings initiatives will help to offset remaining
inflationary costs. With respect to our ERP initiative, Project
Ascent, we completed the final wave of the implementation phase as
planned and will devote our attention to leveraging the new system
to strengthen our execution in fiscal 2024.”
Fourth Quarter Results
Consolidated net sales increased 0.5% to a fourth quarter record
$454.7 million. Last year’s advance customer orders ahead of our
July 1, 2022 ERP go-live date accounted for an estimated $25
million in incremental net sales, of which approximately $11
million was Retail and the remaining $14 million Foodservice.
Retail segment net sales grew 1.3% to $236.2 million driven by our
licensing program and the benefit of our pricing actions, partially
offset by the segment’s lower sales volume and higher levels of
trade spending. Retail segment sales volume, measured in pounds
shipped, declined 3.3%. Excluding the prior-year quarter’s advance
ordering, Retail segment sales volume grew 1.7%. In the Foodservice
segment, net sales declined 0.4% to $218.5 million. Foodservice
sales volume, measured in pounds shipped, declined 9.8% as
influenced by the comparison to last year’s advance customer orders
and slower traffic for some of our national chain restaurant
account customers. Excluding the prior-year quarter’s advance
ordering, Foodservice segment sales volume declined 3.9%.
Consolidated gross profit decreased $5.2 million to $93.2
million and compares to last year’s fourth quarter that benefited
from an estimated $5 million in incremental gross profit attributed
to the advance customer orders ahead of our ERP go-live. Gross
profit was also unfavorably impacted by startup costs at our
recently-expanded dressing and sauce facility in Horse Cave,
Kentucky; temporary production inefficiencies at the facilities we
recently added to our ERP network; and costs associated with a
Retail product line that was discontinued.
SG&A expenses increased $2.6 million to $56.7 million due to
higher expenditures for consumer promotions; investments in
personnel and IT; and increased brokerage costs partially offset by
lower expenditures for Project Ascent. Expenditures for Project
Ascent totaled $5.6 million in the current-year quarter versus
$11.0 million last year.
Impairment charges totaling $25.0 million resulted from the
unfavorable impact of noncash charges to reduce the carrying value
of certain intangible assets of our Flatout, Inc. flatbread
business. The impairment charges are reflected in the Retail
segment. In the prior-year quarter, restructuring and impairment
charges totaling $10.5 million included the unfavorable impact of a
noncash $8.8 million impairment charge to reduce the carrying value
of an intangible asset of Angelic Bakehouse, Inc. That impairment
charge was also reflected in the Retail segment.
Consolidated operating income declined $22.2 million to $11.5
million as influenced by the impairment charges in addition to the
lower gross profit and higher SG&A expenses.
Net income decreased $19.9 million to $9.2 million, or $0.33 per
diluted share, versus $29.0 million, or $1.06 per diluted share,
last year. In the current-year quarter, the impairment charges
reduced net income by $19.3 million, or $0.70 per diluted share,
while expenditures for Project Ascent reduced net income by $4.3
million, or $0.16 per diluted share. In the prior-year quarter,
restructuring and impairment charges reduced net income by $8.1
million, or $0.29 per diluted share, while expenditures for Project
Ascent reduced net income by $8.4 million, or $0.31 per diluted
share. Note that last year’s net income and earnings per diluted
share reflect the benefit of a lower tax rate due to the impact of
favorable state tax adjustments.
Fiscal Year Results
For the fiscal year ended June 30, 2023, net sales increased
8.7% to $1.82 billion compared to $1.68 billion a year ago. Net
income for the fiscal year totaled $111.3 million, or $4.04 per
diluted share, versus the prior-year amount of $89.6 million, or
$3.25 per diluted share. In fiscal 2023, expenditures for Project
Ascent decreased net income by $23.0 million, or $0.84 per diluted
share, and impairment charges reduced net income by $19.3 million,
or $0.70 per diluted share. In fiscal 2022, expenditures for
Project Ascent decreased net income by $30.1 million, or $1.09 per
diluted share, restructuring and impairment charges reduced net
income by $26.9 million, or $0.98 per diluted share, and changes in
contingent consideration increased net income by $2.7 million, or
$0.10 per diluted share.
Conference Call on the Web
The company’s fourth quarter and fiscal year-end conference call
is scheduled for this morning, August 23, 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:
- efficiencies in plant operations and our overall supply chain
network;
- the reaction of customers or consumers to pricing actions we
take to offset inflationary costs;
- price and product competition;
- adequate supply of labor for our manufacturing facilities;
- the impact of customer store brands on our branded retail
volumes;
- inflationary pressures resulting in higher input costs;
- adverse changes in freight, energy or other costs of producing,
distributing or transporting our products;
- 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;
- 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 or key customer
relationships;
- failure to maintain or renew license agreements;
- 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
June 30,
Fiscal Year Ended
June 30,
2023
2022
2023
2022
Net sales
$
454,661
$
452,413
$
1,822,527
$
1,676,390
Cost of sales
361,487
353,995
1,433,959
1,320,671
Gross profit
93,174
98,418
388,568
355,719
Selling, general & administrative
expenses
56,730
54,178
222,091
212,098
Change in contingent consideration
—
—
—
(3,470
)
Restructuring and impairment charges
24,969
10,529
24,969
35,180
Operating income
11,475
33,711
141,508
111,911
Other, net
974
227
1,789
477
Income before income taxes
12,449
33,938
143,297
112,388
Taxes based on income
3,283
4,894
32,011
22,802
Net income
$
9,166
$
29,044
$
111,286
$
89,586
Net income per common share: (a)
Basic
$
0.33
$
1.06
$
4.04
$
3.26
Diluted
$
0.33
$
1.06
$
4.04
$
3.25
Cash dividends per common share
$
0.85
$
0.80
$
3.35
$
3.15
Weighted average common shares
outstanding:
Basic
27,461
27,447
27,462
27,448
Diluted
27,490
27,453
27,482
27,472
(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 June 30,
Fiscal Year Ended June 30,
2023
2022
2023
2022
NET SALES
Retail
$
236,183
$
233,108
$
965,370
$
915,210
Foodservice
218,478
219,305
857,157
761,180
Total Net Sales
$
454,661
$
452,413
$
1,822,527
$
1,676,390
OPERATING
INCOME
Retail
$
10,269
$
31,630
$
139,464
$
151,627
Foodservice
25,319
30,055
106,349
82,745
Nonallocated Restructuring and Impairment
Charges
—
(1,758
)
—
(25,507
)
Corporate Expenses
(24,113
)
(26,216
)
(104,305
)
(96,954
)
Total Operating Income
$
11,475
$
33,711
$
141,508
$
111,911
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited)
(In thousands)
June 30, 2023
June 30, 2022
ASSETS
Current assets:
Cash and equivalents
$
88,473
$
60,283
Receivables
114,967
135,496
Inventories
158,265
144,702
Other current assets
12,758
11,300
Total current assets
374,463
351,781
Net property, plant and equipment
482,206
451,368
Other assets
256,325
287,225
Total assets
$
1,112,994
$
1,090,374
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
111,758
$
114,972
Accrued liabilities
56,994
50,613
Total current liabilities
168,752
165,585
Noncurrent liabilities and deferred income
taxes
81,975
80,102
Shareholders’ equity
862,267
844,687
Total liabilities and shareholders’
equity
$
1,112,994
$
1,090,374
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230822874485/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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