Westerville / OH. (lc) Lancaster Colony Corporation reported results for the company’s fiscal third quarter ended March 31, 2019. Highlights for the quarter are as follows:
- Consolidated net sales increased 7.3 percent to a third quarter record of USD 317.9 million versus USD 296.2 million last year. Excluding net sales attributed to the acquisitions of Bantam Bagels and Omni Baking Company, both of which closed during our fiscal second quarter, consolidated net sales increased 3.5 percent.
- Retail net sales improved 0.7 percent to USD 153.0 million. Excluding the incremental contribution from Bantam Bagels, Retail net sales were essentially unchanged at USD 152.1 million as increased sales of frozen garlic bread and shelf-stable dressings and sauces sold under license agreements were offset by reduced sales resulting from the impact of this year’s later Easter holiday, lower flatbread sales and the decision to selectively exit some low-margin private-label business. Retail net sales also reflect favorable net price realization attributed to inflationary pricing, reduced trade spending and lower coupon expense.
- Foodservice net sales grew 14.3 percent to USD 164.8 million. Excluding the impact from the Bantam Bagels and Omni Baking acquisitions, Foodservice net sales increased 7.1 percent led by continued higher sales volumes for national chain restaurant accounts and our frozen pasta products. Incremental Foodservice net sales from the recent acquisitions totalled USD 2.6 million for Bantam Bagels and USD 7.9 million for Omni Baking. The sales for Omni Baking are the result of an agreement to supply bread products to an affiliated party of the seller for an interim period of up to two years post-closing.
- Consolidated gross profit improved 11.0 percent to USD 75.4 million as influenced by the higher sales volumes, cost savings in manufacturing and procurement attributed to our ongoing lean six sigma program and inflationary pricing partially offset by integration costs for the Omni Baking operations, investments to support expanding retail distribution of Bantam Bagels and higher warehousing costs.
- Selling, general and administrative expenses increased USD 8.1 million driven by a higher level of investment in retail brand marketing, most notably for «New York Brand Bakery» as we withheld spending behind that brand in the prior year due to disruptions in the supply of our frozen garlic bread products. SG+A expenses also reflect increased investments in personnel and the impact of recent acquisitions.
- As influenced by the factors referenced above, consolidated operating income was essentially flat at USD 37.3 million versus the prior-year’s USD 37.5 million.
- Net income was USD 30.6 million, or USD 1.11 per diluted share, compared to USD 27.6 million, or USD 1.00 per diluted share last year. Note that the lower tax rate of 20.8 percent in the current year compared to the prior-year rate of 27.4 percent primarily reflects the favorable impact of the Tax Cuts and Jobs Act of 2017 (Tax Act).
- The regular quarterly cash dividend paid on March 29, 2019 was maintained at the higher amount of USD .65 per share set in November 2018. The company’s balance sheet remained debt free on March 31, 2019 with USD 187.4 million in cash and equivalents.
For the nine months ended March 31, 2019, net sales increased to USD 984.1 million compared to USD 914.8 million a year ago with the acquisitions of Bantam Bagels and Omni Baking accounting for USD 17.9 million in net sales. Net income for the nine-month period totalled USD 117.5 million, or USD 4.26 per diluted share, versus the prior-year amount of USD 102.9 million, or USD 3.74 per diluted share. Current-year net income reflects a favorable non-cash reduction to the fair value of the acquisition-related contingent consideration for Angelic Bakehouse, Inc. in the amount of USD 7.4 million or USD 0.27 per share. The prior-year net income value includes the one-time benefit of USD 9.2 million or USD .33 per share resulting from the re-measurement of the company’s net deferred tax liability under the Tax Act.
CEO David A. Ciesinski commented, «We were pleased to report record net sales for the quarter led by our Foodservice segment. Our lean six sigma program completed another successful quarter with cost savings that helped to offset the higher costs we had anticipated for the integration of the Omni Baking operations and incremental expenditures for product placement and brand marketing in support of increased retail distribution for Bantam Bagels. The higher amount of SG+A expenses also reflects our continued investment in strategic initiatives and personnel to drive the long-term growth of our business. Looking ahead to our fiscal fourth quarter, we expect packaging and certain commodity costs to be modestly inflationary. Our supply chain team will continue in their efforts to offset those costs, including the pursuit of ongoing cost-out initiatives in strategic procurement and savings opportunities in distribution and warehousing. In addition to the contributions from the Bantam Bagels and Omni Baking acquisitions, our fiscal fourth quarter sales will also benefit from the later Easter holiday.»
