Lancaster Colony: Reports Q1-2020 Sales And Earnings

Westerville / OH. (lc) Lancaster Colony Corporation reported results for the company’s fiscal first quarter ended September 30, 2019. Highlights for the quarter are as follows:

• Consolidated net sales increased 6.4 percent to a first quarter record USD 337.1 million versus USD 316.7 million last year. Excluding net sales attributed to Bantam Bagels and Omni Baking Company, both of which were acquired in the second quarter of fiscal 2019, consolidated net sales increased 2.6 percent.
• Retail net sales grew 2.0 percent to USD 166.1 million. Excluding the incremental contribution from Bantam Bagels, Retail net sales improved 1.5 percent. Organic sales growth was driven by higher sales of Marzetti® produce dressings, veggie dips and caramel dips, increased sales of frozen garlic bread and continued volume gains for shelf-stable dressings and sauces sold under license agreements partially offset by declines in flatbread wraps and frozen dinner rolls and our decision to selectively exit some low-margin private-label business.
• Foodservice net sales grew 11.1 percent to USD 171.0 million. Excluding the impact from the Bantam Bagels and Omni Baking acquisitions, Foodservice net sales increased 3.9 percent with national chain restaurant accounts, branded products and frozen pasta products all contributing to growth. Incremental Foodservice net sales totaled USD 3.2 million for Bantam Bagels and USD 7.9 million for Omni Baking. The Omni Baking sales are attributed to a temporary supply agreement that is expected to end no later than November 2020.
• Consolidated gross profit grew USD 10.9 million or 13.4 percent to USD 92.1 million driven by the increased sales volumes, continued cost savings from our lean six sigma program and some favorable commodity costs.
• SG+A expenses increased USD 7.4 million to USD 39.5 million including USD 2.7 million in spend for our ERP initiative. SG+A expenses were also impacted by increased investments in consumer promotions and higher personnel costs along with incremental expenses attributed to Bantam Bagels.
• The restructuring and impairment charge of USD 0.9 million is the result of our decision to close our frozen bread facility in Saraland, Alabama. Production at that facility ceased in mid-July and was subsequently moved to other facilities within our manufacturing network. We do not anticipate any significant additional charges attributed to this plant closure.
• Consolidated operating income increased 5.3 percent to USD 51.7 million from USD 49.1 million in the prior year driven by the gross profit improvement. Retail segment operating margin improved from 20.9 percent to 21.3 percent while Foodservice segment operating margin increased from 12.3 percent to 13.9 percent.
• Net income was USD 40.7 million, or USD 1.48 per diluted share, compared to USD 39.0 million, or USD 1.42 per diluted share, last year. Spend for the ERP initiative decreased net income by USD 2.1 million or USD 0.08 per diluted share and the restructuring and impairment charge reduced net income by USD 0.7 million or USD 0.02 per diluted share.
• The regular quarterly cash dividend was continued at the higher level of USD 0.65 per share set in November 2018. The company’s balance sheet remained debt free on September 30, 2019 with USD 173 million in cash and equivalents.

CEO David A. Ciesinski commented, «We were pleased to see the uptick in Retail sales growth and continued strength in Foodservice sales resulting in a record level of consolidated net sales for our fiscal first quarter. The increased sales combined with our supply chain team’s ongoing lean six sigma program and other initiatives helped drive our consolidated gross margin up nearly 170 basis points to 27.3 percent.»

«Looking ahead to our fiscal second quarter, historically our biggest sales quarter of the year, we will remain focused on our core strategic initiatives to grow our base business, pursue and achieve supply chain cost savings, and continue to integrate our recent acquisitions. Our ERP initiative, Project Ascent, is also progressing as planned with our internal team fully assembled and working with our system integrator. We will pursue a ‘fit-to-standard’ approach for the design and installation of an SAP software solution with the initial deployment planned to commence in the first half of fiscal 2021.»