Westerville / OH. (lc) Lancaster Colony Corporation reported results for the company’s fiscal fourth quarter and fiscal year ended June 30, 2021. Summary:
- Consolidated fourth quarter net sales increased 20.2 percent to a record USD 385.6 million. Retail segment net sales grew 11.4 percent in the quarter to USD 214.3 million while Foodservice segment net sales surged 33.3 percent to USD 171.3 million. For the fiscal year, consolidated net sales increased 9.9 percent to a record USD 1.5 billion as Retail segment net sales advanced 16.1 percent to USD 829.0 million and Foodservice segment net sales improved 2.9 percent to USD 638.1 million.
- Consolidated gross profit increased 8.5 percent to USD 96.7 million in the fourth quarter and 8.0 percent to USD 386.7 million for the fiscal year.
- Consolidated operating income grew 1.8 percent to USD 40.9 million in the fourth quarter and 5.6 percent to USD 185.9 million for the fiscal year. Operating income growth for the quarter was unfavourably impacted by a USD 4.8 million increase in expenditures for Project Ascent, our ERP initiative.
- Fourth quarter net income grew to USD 1.15 per diluted share versus USD 1.10 per diluted share last year while fiscal year net income improved to USD 5.16 per diluted share versus USD 4.97 per diluted share last year.
CEO David A. Ciesinski commented, «We were very pleased to complete both the fiscal year and fourth quarter with record sales and gross profit. These strong results reflect the high level of commitment and countless contributions made by all the Lancaster Colony associates this past year despite the challenges posed by the impacts of Covid-19. I am truly grateful for the exceptional effort and demonstrated resilience of our associates throughout the year to service and grow our business. Our top priorities remain the health, safety and welfare of our employees and continuing to play our part in the country’s vital food supply chain.»
«In the fourth quarter, the sales growth in our Retail business was led by the continued success of our licensing program, most notably «Chick-fil-A» sauces and «Buffalo Wild Wings» sauces. Growth from these licensed products enabled us to increase our fourth quarter Retail net sales 11.4 percent on top of last year’s significant 24.5 percent gain. In Foodservice, the robust recovery in fourth quarter sales resulted from a substantial pickup in demand throughout our restaurant customer base, including notable increases for midscale and casual dining concepts.»
«Looking ahead to fiscal 2022, we anticipate our Retail sales will continue to benefit from the growth of our licensing program while increased consumer demand for in-restaurant dining is expected to drive our Foodservice sales higher. A notable increase in commodity costs is forecast for the coming year, particularly for soybean oil. Higher costs for other items such as packaging, labour and freight will also pose a headwind to our financial results. To help mitigate these rising costs, we have pricing initiatives in place for our Retail segment while our Foodservice segment will continue to realize offsets to increased commodity and freight costs through contractual-based inflationary pricing. Our ongoing cost savings programs and other net price realization efforts will also partially offset the unfavourable impacts of inflation in the coming year. Implementation for Project Ascent has been deferred to the start of fiscal 2023 as we have prioritized servicing the shifting demands and growth of our business over the implementation timeline.»
Fourth Quarter Results
Consolidated net sales increased 20.2 percent to a fourth quarter record USD 385.6 million. Excluding Omni Baking sales, which totalled USD 2.8 million last year, consolidated net sales increased 21.2 percent. The Omni Baking sales were attributed to a temporary supply agreement that was terminated effective October 31, 2020. Retail segment net sales grew 11.4 percent to USD 214.3 million, driven by «Chick-fil-A» sauces and «Buffalo Wild Wings» sauces, both of which are sold under exclusive licensing agreements. Refrigerated dips were also a noted contributor to the increase in Retail sales. In the Foodservice segment, net sales rebounded strongly to increase 33.3 percent as many of the quick-service restaurant and pizza chain customers in our mix of national chain accounts continued to perform well, demand from midscale and casual dining concepts showed an impressive recovery, and sales of our branded Foodservice items rose significantly as well. Inflationary pricing also contributed to the growth in Foodservice net sales. Excluding all Omni Baking sales, Foodservice net sales increased 36.3 percent.
Consolidated gross profit increased 8.5 percent to a fourth quarter record USD 96.7 million. Gross profit benefited from the strong sales growth and our ongoing cost savings programs partially offset by higher commodity and freight costs and a less favourable sales mix. Gross profit was also negatively impacted by incremental expenditures incurred to service the surging and shifting demand for our products, including higher costs attributed to increased co-manufacturing volumes. We continue to monitor the protocols and guidelines provided by government health authorities and make the necessary investments to promote safe operations at all our plants and distribution centers.
SG+A expenses increased USD 6.9 million to USD 55.8 million as expenditures for Project Ascent totaled USD 10.3 million in the current-year quarter versus USD 5.5 million last year. The prior-year SG+A expenses also included a USD 3.2 million write-off of engineering expenses for a plant expansion project that was cancelled and later replaced with a redesigned project that better aligned with the growing and shifting demand for our dressing and sauce products.
Consolidated operating income grew 1.8 percent to USD 40.9 million as the benefit of the sales increase and our cost savings programs was nearly offset by the factors noted above including the higher commodity and freight costs, incremental co-manufacturing costs, less favourable sales mix and increased expenditures for Project Ascent.
Net income increased USD 1.3 million to USD 31.7 million, or USD 1.15 per diluted share, versus USD 30.4 million, or USD 1.10 per diluted share, last year. Expenditures for Project Ascent reduced net income by USD 7.9 million, or USD 0.28 per diluted share, in the current-year quarter compared to USD 4.2 million, or USD 0.15 per diluted share, in the prior-year quarter. The write-off of engineering expenses for the cancelled expansion project reduced net income in the prior-year quarter by USD 2.4 million, or USD 0.09 per diluted share. Net income and earnings per diluted share in the current-year quarter also reflect the benefit of a lower tax rate compared to last year.
Fiscal Year Results
For the fiscal year ended June 30, 2021, net sales increased 9.9 percent to USD 1.5 billion. Excluding all Omni Baking sales, consolidated net sales increased 11.5 percent. Net income for the fiscal year totaled USD 142.3 million, or USD 5.16 per diluted share, versus the prior-year amount of USD 137.0 million, or USD 4.97 per diluted share. Expenditures for Project Ascent decreased fiscal 2021 net income by USD 28.9 million, or USD 1.05 per diluted share, the favourable adjustment to the contingent consideration for Bantam Bagels increased net income by USD 4.3 million, or USD 0.16 per diluted share, while an impairment charge for certain intangible assets of the Bantam Bagels business reduced net income by USD 0.9 million, or USD 0.03 per diluted share. In fiscal 2020, expenditures for Project Ascent decreased net income by USD 13.7 million, or USD 0.50 per diluted share, the write-off of engineering expenses for the cancelled expansion project reduced net income by USD 2.4 million, or USD 0.09 per diluted share, a Foodservice inventory write-down reduced net income by USD 2.3 million, or USD 0.08 per diluted share, and restructuring and impairment charges reduced net income by USD 0.7 million, or USD 0.02 per diluted share.
