Notable News to Watch: Lancaster Colony Corp. (NASDAQ: LANC)

Lancaster Colony Corp. (NASDAQ: LANC) remained among the day gainers losers and traded with change of 1.31% on volume of 67341 shares in the last session as compared to average volume of 88143 shares. During last trade its minimum price was $176.56 and it gained highest price of $180.65.

Lancaster Colony Corporation (LANC) recently stated results for the fourth quarter and fiscal year ended June 30, 2020.

Highlights are as follows:

Fourth Quarter Results

Consolidated net sales declined 0.9% to $320.9M versus $323.7M last year.  Not Including all sales attributed to a temporary supply contract resulting from the November 16, 2018 acquisition of Omni Baking Company, consolidated net sales increased 0.7%.

Retail net sales surged 24.5% to a record $192.4M as the impacts of the COVID-19 outbreak drove higher demand for at-home food consumption.  The increase in Retail net sales was led by frozen garlic bread, Olive Garden® dressings sold under a license contract and frozen dinner rolls.  The section’s results also benefited from recent introductions of new products sold under license contracts, including an expanded offering of single-bottle Buffalo Wild Wings® sauces and a regional pilot test for Chick-fil-A® sauces.

Foodservice net sales declined 24.1% to $128.4M as foodservice channel demand was unfavorably influenced by the impacts of COVID-19.  After a very slow start in April, consumer demand at quick-service restaurants made a strong recovery in May and June, and sales for other restaurants also improved notably throughout the quarter.

Consolidated gross profit improved $10.9M, or 13.9%, to $89.1M driven by the favorable sales mix shift to Retail, our cost savings programs and improved net price realization in Retail.  The gross profit results were unfavorably influenced by costs related to COVID-19, including increased hourly wage rates for our front-line employees together with the effect of lower Foodservice volumes and reduced operating efficiencies as our factories and distribution centers adopted guidelines and implemented protocols provided by government health authorities to promote safe operations.

SG&A expenses rose $8.9M, principally driven by a $3.8M increase in expenditures for Project Ascent in support of our ERP project and related initiatives in addition to costs attributed to the impacts of COVID-19, including a write-off of engineering expenses for a dressing plant expansion project.  Shifts in demand between our Retail and Foodservice sections led us to cancel the expansion project, and we are now evaluating alternative investments that best align with the future needs and growth opportunities for our dressing and sauce products.

The previous year’s change in contingent consideration included the favorable impact of a non-cash reduction to the contingent consideration for Angelic Bakehouse, Inc. (“AB Adjustment”) in the amount of $7.4M.

Consolidated operating income declined $3.1M to $40.2M as influenced by the favorable AB adjustment in the prior-year quarter, costs related to the COVID-19 outbreak and increased expenses for Project Ascent, partially offset by the improved top-line performance of the Retail section and benefits from our cost savings programs.

Retail section operating income increased $6.5M, or 20.1%, to $38.8M driven by the importantly higher sales volumes.  The Retail section operating income in the prior-year quarter included the favorable impact of the $7.4M AB Adjustment.

Foodservice section operating income declined $8.3M, or 45.3%, to $10.1M primarily Because of the notable decline in Foodservice sales, the write-off of engineering expenses resulting from the cancelation of the dressing plant expansion project, lower factory overhead absorption and higher operating costs resulting from the impacts of COVID-19.

Net income declined $2.6M to $30.4M.  Expenditures for Project Ascent reduced net income by $4.2M this year contrast to $1.4M last year.  The favorable AB Adjustment increased net income in the prior-year quarter by $5.7M.

Net income per diluted share reduced $0.10 to $1.10.  Expenditures for Project Ascent reduced net income per diluted share by $0.15 this year versus $0.05 last year.  In the prior-year quarter, the favorable AB Adjustment increased net income per diluted share by $0.21.

The regular quarterly cash dividend paid on June 30, 2020 was maintained at the higher amount of $0.70 per share set in November 2019.

Fiscal Year Results

Consolidated net sales increased 2.0% to a fiscal year record $1,334M versus $1,308M last year.

Retail net sales increased 8.8% to $714.1M as higher retail channel demand attributed to the impacts of COVID-19 and contributions from shelf-stable dressings and sauces sold under license contracts, including new product introductions, drove Retail sales gains.  Higher sales volumes for frozen garlic bread and frozen dinner rolls, together with some beneficial net price realization, also added to the growth in Retail net sales.

Foodservice net sales reduced 4.7% to $620.3M.  After growth of 7.2% in the first half of the fiscal year, Foodservice net sales declined 16.1% in the second half as consumer demand shifted away from the foodservice channel due primarily to the impacts of COVID-19.  Not Including all sales resulting from the November 16, 2018 acquisition of Omni Baking Company, Foodservice net sales declined 5.3%.  Omni Baking sales attributed to a temporary supply contract totaled $22.3M in the current fiscal year versus $19.4M last year.

Consolidated gross profit increased $31.8M, or 9.8%, to $358.0M driven by the higher sales volumes in Retail, our cost savings programs, including continued contributions from our planned procurement and transportation management initiatives, improved net price realization and lower commodity costs.  Offsets to gross profit growth included higher manufacturing costs and other expenses resulting from the impacts of COVID-19.

SG&A expenses rose $31.1M to $180.9M as expenditures for Project Ascent increased $16.3M to $18.0M.  Investments in technology and IT infrastructure, the write-off for the canceled dressing plant expansion project and other expenses attributed to the impacts of COVID-19, and a higher level of consumer promotional spending also contributed to the rise in SG&A expenses.

The previous year’s change in contingent consideration included a favorable AB Adjustment of $17.1M.

Consolidated operating income declined $15.0M to $175.9M driven by the impact of the previous year’s favorable AB adjustment, increased expenditures for Project Ascent, higher costs attributed to the impacts of COVID-19 and increased investments in technology and IT infrastructure partially offset by the more favorable sales mix, our cost savings programs, improved net price realization and lower commodity costs.

Net income declined $13.6M to $137.0M.  Expenditures for Project Ascent reduced net income by $13.7M this year contrast to $1.4M last year.  Last year’s favorable AB Adjustment increased net income by $13.1M.

Net income per diluted share was $4.97 contrast to $5.46 last year.  Expenditures for Project Ascent reduced net income per diluted share by $0.50 in the current fiscal year versus $0.05 last year.  Last year’s favorable AB Adjustment increased net income per diluted share by $0.48.

The regular quarterly cash dividend was increased for the 57th consecutive year.

The company’s balance sheet remained strong, with no debt outstanding and over $198M in cash and equivalents as of June 30, 2020.

Its earnings per share (EPS) expected to touch remained -8.90% for this year while earning per share for the next 5-years is expected to reach at 3.00%. LANC has a gross margin of 26.00% and an operating margin of 13.20% while its profit margin remained 10.20% for the last 12 months.

 

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