Lancaster Colony Reports First Quarter Fiscal 2011 Results

Oct 28, 2010, 07:12 ET from Lancaster Colony Corporation

COLUMBUS, Ohio, Oct. 28 /PRNewswire-FirstCall/ -- Lancaster Colony Corporation (Nasdaq: LANC) today reported results for the first fiscal quarter ended September 30, 2010:

  • Net sales reached $265 million, up four percent from first quarter sales of $254 million last year.
  • Specialty Foods net sales of $220.5 million were up two percent above the year-ago level, reflecting an increase in foodservice sales.
  • Glassware and Candles sales increased 18 percent from the year-ago quarter to $44.5 million, primarily reflecting higher unit volume.
  • Net income of $22,767,000, or $.81 per diluted share, while the company's second highest totals for a first quarter, decreased from the prior-year record of $28,405,000, or $1.01 per diluted share. The latest quarter's results were affected by higher material and food-related marketing costs. In the prior year, the approximately $0.9 million cost of consolidating food manufacturing facilities was largely offset by income from the favorable resolution of previously-reserved state tax matters.
  • The cash dividend was continued at the higher rate set in November 2009. The company's debt-free balance sheet showed $87.4 million in cash at September 30, 2010.

Chairman and CEO John B. Gerlach, Jr. said, "While we posted higher first quarter sales, increased material and other costs challenged our margins when comparing to record-high net income a year ago."

Specialty Foods sales increased in the foodservice channel on expanded volumes associated with new customer programs, despite somewhat lower pricing.  Overall retail sales declined by less than one percent, with growth achieved in some non-frozen lines largely offset by softness within the frozen garlic bread category.  Operating income of $38.0 million declined 12 percent.  The segment's 17.2 percent operating margin reflected a less favorable sales mix and higher ingredient and packaging costs, which impacted margins by approximately one percent of segment net sales.  Margins were also affected by greater investments in consumer-directed marketing and increased freight costs.  

First quarter candle sales increased due to the addition of new accounts and solid consumer takeaway of the company's high-quality, value-priced candles.  Segment operating income was about breakeven and declined by approximately $1.7 million, primarily reflecting higher wax prices, which impacted gross margin by over $2 million.

"We are encouraged," Mr. Gerlach said, "by the early customer reception of our retail food products that are currently being introduced into grocery produce departments.  Marzetti® Otria™ Greek yogurt-based veggie dips began shipping in the first quarter. In the second quarter we began shipping Marzetti® Simply Dressed™ refrigerated salad dressings, which address the current consumer nutritional/wellness focus on natural, preservative-free foods. We expect to see modest candle sales growth in the second quarter. While we have successfully implemented price increases on a limited basis, we anticipate that margins will continue to see pressure from higher input costs.  The weak economic environment also leaves consumer spending uncertain during our current second fiscal quarter, which is a seasonally important contributor to our full-year results.  With our strong balance sheet, we are well-positioned to support future growth."

Conference Call on the Web

The company's first quarter conference call is scheduled for this morning, October 28, 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 diversified manufacturer and marketer of consumer products focusing primarily on specialty foods 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 that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results may differ as a result of factors over which we have no, or limited, control. Management believes these forward-looking statements to be reasonable; however, you should not place undue reliance on such statements that are based on current expectations. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update such forward-looking statements. More detailed statements regarding significant events that could affect our financial results are included in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission and are available on our website at www.lancastercolony.com.

LANCASTER COLONY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands except per-share amounts)




Three Months Ended


September 30,


2010

2009




Net sales

$ 265,051

$ 254,160

Cost of sales

206,980

190,453




Gross margin

58,071

63,707




Selling, general & administrative expenses

23,245

20,468

Restructuring and impairment charges  

830




Operating income

34,826

42,409

Interest income and other – net

16

25




Income before income taxes

34,842

42,434

Taxes based on income

12,075

14,029




Net income

$ 22,767

$ 28,405




Net income per common share:(a)



Net income – basic and diluted

$ .81

$ 1.01

Cash dividends per common share  

$ .30

$ .285

Weighted average common shares outstanding:



 Basic

28,014

28,081

 Diluted

28,037

28,115




(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


September 30,


2010

2009




NET SALES



 Specialty Foods

$ 220,512

$ 216,341

 Glassware and Candles

44,539

37,819





$ 265,051

$ 254,160

OPERATING INCOME



 Specialty Foods  

$  37,973

$  43,152

 Glassware and Candles

2

1,671

 Corporate expenses  

(3,149)

(2,414)





$  34,826

$  42,409



LANCASTER COLONY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)


September 30,

June 30,


2010

2010




ASSETS



Current assets:



 Cash and equivalents

$ 87,430

$ 100,890

 Receivables net of allowance



   for doubtful accounts

82,927

67,766

 Total inventories  

131,258

121,509

 Deferred income taxes and other current assets    

25,814

27,234




   Total current assets  

327,429

317,399

Net property, plant and equipment  

168,802

166,097

Other assets  

102,010

102,957




     Total assets  

$ 598,241

$ 586,453




LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:



 Accounts payable

$ 45,233

$ 41,904

 Accrued liabilities

38,969

36,049




   Total current liabilities

84,202

77,953

Other noncurrent liabilities and



 deferred income taxes

24,829

23,592

Shareholders' equity

489,210

484,908




     Total liabilities and shareholders' equity

$ 598,241

$ 586,453



SOURCE Lancaster Colony Corporation



RELATED LINKS

http://www.lancastercolony.com