Lancaster Colony Reports Fiscal Year And Fourth Quarter Results

Aug 21, 2014, 07:20 ET from Lancaster Colony Corporation

COLUMBUS, Ohio, Aug. 21, 2014 /PRNewswire/ -- Lancaster Colony Corporation (Nasdaq: LANC) today reported results for the fiscal year and fourth quarter ended June 30, 2014.  All financial results of the company's Glassware and Candles segment have been reclassified to discontinued operations due to the sale of effectively all of the net operating assets of that segment on January 30, 2014.  Fiscal year highlights are as follows:

  • Net sales increased nearly three percent to $1,041 million versus $1,014 million last year.
  • Operating income of $153.8 million was level with the prior year's $153.9 million as the benefits of stronger sales and lower material costs were offset by the impact of increased marketing and promotional costs, including those associated with the introduction of several new retail products, and lower pricing in the foodservice channel.
  • Income from continuing operations totaled $101.0 million compared to $103.9 million a year ago, as this year's effective tax rate was 34.1% versus last year's 32.5%.  The fiscal 2013 tax rate was favorably influenced by an increased deduction for dividends paid to the company's frozen ESOP due to the $5.00 per share special dividend paid in December 2012 and the release of reserves associated with uncertain tax positions.
  • Net income for the year totaled $75.0 million or $2.74 per diluted share after accounting for the loss from discontinued operations of $26.0 million, or $.95 per share, which included a pre-tax loss of approximately $44 million on the sale of the company's candle operations.  The year-ago net income totaled $109.2 million, or $3.99 per diluted share, inclusive of income from discontinued operations of $5.4 million, or $.20 per share.
  • The quarterly cash dividend was increased for the 51st consecutive year. 
  • The balance sheet remained strong, with no debt outstanding and nearly $212 million in cash and equivalents.

Fourth Quarter Results

Highlights of the fourth quarter ended June 30, 2014 include the following:

  • Net sales increased six percent to $259 million, a fourth-quarter record for Specialty Foods, versus $245 million in the year-ago quarter.  Retail sales volumes improved solidly as further growth in the sales of dressings and croutons was bolstered by the sales of certain frozen products that benefited from the Easter holiday's shift into the fourth quarter.  Retail net sales growth was tempered by significantly increased promotional and coupon redemption costs, including investments associated with several new product introductions.  Foodservice net sales were modestly above prior-year levels as the contribution from higher volumes was largely offset by lower pricing.
  • Operating income declined 11 percent to $32.3 million from $36.2 million a year ago due to increased marketing and promotional costs, higher freight costs, lower foodservice pricing and some operating inefficiencies that have occurred as we transition towards expanding our dressing production capacity.  Higher sales volumes, lower commodity costs and an improved sales mix helped to partially offset these unfavorable factors.
  • Income from continuing operations was $20.9 million compared with $25.4 million last year.  Earnings per share from continuing operations were $.76 compared to $.93 a year ago.  Income taxes for the prior-year fourth quarter included an after-tax benefit of approximately $0.7 million, or $.03 per share, from the release of reserves associated with uncertain tax positions.
  • Fourth quarter net income totaled $21.3 million or $.78 per share, including $0.4 million, or $.02 per share, from discontinued operations due to favorable tax adjustments.  In the prior-year quarter, net income was $25.5 million or $.93 per share with income from discontinued operations having contributed less than $0.1 million.

Fiscal 2014 Commentary

Chairman and CEO John B. Gerlach, Jr. said, "Specialty Foods net sales reached a record high in fiscal 2014 while operating income was unchanged as the benefits from higher sales volumes and lower commodity costs were offset by reduced pricing in the foodservice channel and greater investment in trade and consumer promotional spend.  In the second half of the year, we also experienced higher freight costs and some operating inefficiencies associated with tighter capacity for dressings and sauces.  In the fourth quarter, our investment in new products was significant, while the sales contribution for these items was minimal as their placement and distribution gets underway. We were pleased to complete the mid-year divestiture of our candle operations and strategically position ourselves as a food-only business going forward."

Fiscal 2015 Commentary

Mr. Gerlach added, "We begin the year with a sustained leadership position in our key retail categories, strong and expanding relationships with our foodservice customers, balance sheet flexibility and future growth potential from innovative new products.  Recent product introductions expected to support sales growth in the coming year include the Reames® Presto Pasta line of microwavable frozen pasta along with New York BRAND® Soft Pull Aparts garlic bread, Whole Grain Texas Toast garlic toast and Crispy Onions salad toppings.  We believe that fiscal 2015 earnings will be influenced by consumer sentiment in this slow-growth economy, our continuing investment in and success with new products, higher-trending freight costs and the completion of our dressing capacity expansion project that should also provide efficiency gains.  We anticipate our investment in new product support to remain significantly above the prior-year levels in the first half of the fiscal year.  Commodity costs are expected to be modestly favorable in the first half of the fiscal year with lower pricing in the foodservice channel serving as a partial offset."

Conference Call on the Web

The company's fiscal year and fourth quarter conference call is scheduled for this morning, August 21, at 10:00 a.m. ET.  You may access the call through a live webcast by using the link provided on the company's Internet home page at www.lancastercolony.com.  Replays of the webcast will 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 markets.

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 potential for loss of larger programs or key customer relationships;
  • the effect of consolidation of customers within key market channels;
  • the success and cost of new product development efforts;
  • the lack of market acceptance of new products;
  • price and product competition;
  • the reaction of customers or consumers to the effect of price increases we may implement;
  • the possible occurrence of product recalls or other defective or mislabeled product costs;
  • changes in demand for our products, which may result from loss of brand reputation or customer goodwill;
  • fluctuations in the cost and availability of raw materials and packaging;
  • dependence on contract manufacturers;
  • maintenance of competitive position with respect to other manufacturers;
  • adverse changes in energy costs and other factors that may affect costs of producing, distributing or transporting our products;
  • stability of labor relations;
  • dependence on key personnel;
  • changes in estimates in critical accounting judgments;
  • the outcome of any litigation or arbitration; 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) (b)

(In thousands except per-share amounts)

Three Months Ended  June 30,

Fiscal Year Ended  June 30,

2014

2013

2014

2013

Net sales

$

258,808

$

245,190

$

1,041,075

$

1,013,803

Cost of sales

200,942

187,483

792,507

769,096

Gross margin

57,866

57,707

248,568

244,707

Selling, general & administrative expenses

25,550

21,479

94,801

90,784

Operating income

32,316

36,228

153,767

153,923

Interest income and other – net

(160)

(99)

(488)

(105)

Income from continuing operations before income taxes

32,156

36,129

153,279

153,818

Taxes based on income

11,255

10,728

52,293

49,958

Income from continuing operations

20,901

25,401

100,986

103,860

Discontinued operations, net of tax:

  (Loss) income from discontinued operations

(117)

76

3,058

5,389

  Income (loss) on sale of discontinued operations

543

(29,058)

Total discontinued operations

426

76

(26,000)

5,389

Net income

$

21,327

$

25,477

$

74,986

$

109,249

Net income (loss) per common share:(a)

  Continuing operations - basic

$

0.76

$

0.93

$

3.70

$

3.80

  Continuing operations - diluted

$

0.76

$

0.93

$

3.69

$

3.79

Discontinued operations - basic and diluted

$

0.02

$

$

(0.95)

$

0.20

Net income - basic

$

0.78

$

0.93

$

2.75

$

4.00

Net income - diluted

$

0.78

$

0.93

$

2.74

$

3.99

Cash dividends per common share

$

0.44

$

0.40

$

1.72

$

6.52

Weighted average common shares outstanding:

Basic

27,282

27,277

27,264

27,252

Diluted

27,322

27,316

27,308

27,285

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

(b) All glassware and candles operations have been reflected as discontinued operations in all periods presented.

LANCASTER COLONY CORPORATION

BUSINESS SEGMENT INFORMATION (Unaudited) (b)

(In thousands)

Three Months Ended  June 30,

Fiscal Year Ended June 30,

2014

2013

2014

2013

NET SALES - Specialty Foods

$

258,808

$

245,190

$

1,041,075

$

1,013,803

OPERATING INCOME

   Specialty Foods

$

35,019

$

38,920

$

165,383

$

165,710

   Corporate expenses

(2,703)

(2,692)

(11,616)

(11,787)

Total Operating Income

$

32,316

$

36,228

$

153,767

$

153,923

 

 

LANCASTER COLONY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (b)

(In thousands)

June 30, 2014

June 30, 2013

ASSETS

Current assets:

   Cash and equivalents

$

211,539

$

123,385

   Receivables – net of allowance for doubtful accounts

57,808

56,337

   Inventories

74,516

67,809

   Deferred income taxes and other current assets

23,428

22,550

   Current assets of discontinued operations

55,977

      Total current assets

367,291

326,058

Net property, plant and equipment

168,674

168,074

Other assets

102,665

103,231

Noncurrent assets of discontinued operations

22,601

         Total assets

$

638,630

$

619,964

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

   Accounts payable

$

37,907

$

36,459

   Accrued liabilities

31,165

32,602

   Current liabilities of discontinued operations

8,116

      Total current liabilities

69,072

77,177

Other noncurrent liabilities and deferred income taxes

40,961

41,565

Shareholders' equity

528,597

501,222

         Total liabilities and shareholders' equity

$

638,630

$

619,964

 

SOURCE Lancaster Colony Corporation



RELATED LINKS

http://www.lancastercolony.com