Lancaster Colony Reports Second Quarter Sales And Earnings
COLUMBUS, Ohio, Jan. 29, 2004 -- Lancaster Colony Corporation today reported that net income for the company's second fiscal quarter ended December 31, 2003 reached $26,650,000, or $.74 per diluted share, while net sales declined five percent to $291 million versus $308 million in the second quarter last year.
For the second quarter a year ago, the company earned $51,979,000, or $1.43 per share, which included pretax income of $39.2 million (67 cents per share after taxes) associated with a distribution under the Continued Dumping and Subsidy Offset Act (CDSOA). In contrast, this year's second quarter earnings included pretax income of $2.0 million (three cents per share after taxes) from a CDSOA distribution.
The latest quarter's results included pretax income of $1.2 million (two cents per share after taxes) related to a bad-debt recovery and pretax income of $1.0 million (two cents per share after taxes) related to the liquidation of LIFO inventories carried at substantially lower prior years' costs. Included in the year-ago quarter's results was LIFO-related pretax income of $2.7 million (five cents per share after taxes) and a pretax charge of $4.9 million (eight cents per share after taxes) attributable to the restructuring of the company's consumer glassware operations.
For the six months ended December 31, 2003, net income totaled $46,350,000 compared to $72,535,000 earned in the corresponding period a year ago. Diluted earnings per share were $1.29 compared to $1.99 for the first six months last year. Six-month net sales were $558 million compared to $583 million last year.
The six-month results for both years included the CDSOA income and other pretax income items that affected second quarter results. In the first half this year, the LIFO-related pretax income amounted to $2.6 million (five cents per share after taxes) compared with $2.7 million (five cents per share after taxes) a year ago.
John B. Gerlach, Jr., chairman and CEO of Lancaster Colony Corporation, said, "Stronger December volume versus a year ago could not offset the generally weak retail environment, leaving quarterly results somewhat below our initial expectations. Our results were also adversely affected by higher material costs, especially for food commodities."
Specialty Foods net sales during the second quarter totaled $164 million, essentially flat with the prior year's total. Segment operating income declined nine percent. Mr. Gerlach noted, "Foodservice sales increased slightly for the quarter, although retail demand for sauces and dressings was adversely affected by a lackluster market with more competitive conditions. Increased ingredient costs for dairy-related items and soybean oil hampered profitability. Soybean oil alone had a year-over-year adverse impact in excess of $1.9 million in the second quarter." Operating results for the quarter were minimally influenced by the December 2003 acquisition of Warren Frozen Foods, Inc. Incremental sales attributable to this transaction were less than $1 million. Mr. Gerlach added, "Our initial work with the Warren staff and operations confirms our earlier enthusiasm for this acquisition."
Glassware and Candles net sales totaled $73 million in the second quarter, an 11 percent decline from the year-ago quarter. Operating income was impacted by the LIFO-related income, the bad-debt recovery and the prior year restructuring charge. Mr. Gerlach said, "While we were somewhat encouraged by a year-over-year improvement in sales volumes toward the end of the quarter, many of the retail markets for our products remain challenged by soft demand and competitive pressures. The lower demand continues to unfavorably affect overhead absorption."
Automotive segment sales during the quarter totaled $55 million, an 11 percent decline from the prior year's total. Operating income declined 16 percent to $3.8 million. Mr. Gerlach observed, "The top-line decline was primarily attributable to aluminum operations where the volume lost on one OEM program was not fully offset by other gains. In addition to the lower volumes and very competitive market conditions, higher material costs in our floor mat operations hampered margins."
Looking forward, Mr. Gerlach stated, "We remain focused on improving product offerings and further lowering production costs. Recent or upcoming new product introductions include Marzetti brand one-carb pourable salad dressings and New York brand six-carb Texas Garlic Toast. Over the next few months, our challenges include less than robust market conditions, low-volume production inefficiencies and higher material costs, especially for soybean oil, which recently hit a ten-year high. However, our strong balance sheet with no debt leaves us well-positioned to face these hurdles."
The company's second quarter conference call is scheduled for this morning, January 29, 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. The webcast will be archived and available on the company's website.
This news release contains forward-looking statements related to future growth and earnings opportunities. Such statements are based upon certain assumptions and assessments made by management of the company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. Actual results may differ as a result of factors over which the company may have no, or limited, control including the strength of the economy, slower than anticipated sales growth, the extent of operational efficiencies achieved, the success of new product introductions, price and product competition, and increases in raw materials costs. Management believes these forward-looking statements to be reasonable; however, undue reliance should not be placed on such statements, which are based on current expectations. The company undertakes no obligation to publicly update such forward-looking statements. More detailed statements regarding significant events which could affect the company's financial results are included in the company's Forms 10-K and 10-Q filed with the Securities and Exchange Commission.
LANCASTER COLONY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands except per-share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
2003 2002 2003 2002
Net sales $ 291,196 $ 307,669 $ 557,848 $ 583,490
Cost of sales 226,145 233,437 436,990 451,572
Gross margin 65,051 74,232 120,858 131,918
Selling, general
& administrative
expenses 24,903 26,236 49,072 51,122
Restructuring and
impairment charge -- 4,945 -- 4,945
Operating income 40,148 43,051 71,786 75,851
Interest income
and other net 2,480 40,057 2,826 40,454
Income before income
taxes 42,628 83,108 74,612 116,305
Taxes based on income 15,978 31,129 28,262 43,770
Net income $26,650 $51,979 $46,350 $72,535
Net income per
common share:(a)
Basic $.75 $1.43 $1.30 $1.99
Diluted $.74 $1.43 $1.29 $1.99
Cash dividends per
common share $.23 $.20 $.43 $.38
Weighted average
common shares
outstanding:
Basic 35,719 36,354 35,741 36,458
Diluted 35,798 36,406 35,815 36,517
(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 Six Months Ended
December 31, December 31,
2003 2002 2003 2002
NET SALES
Specialty Foods $ 163,888 $ 164,316 $ 318,705 $ 311,949
Glassware and
Candles 72,709 81,753 128,835 149,963
Automotive 54,599 61,600 110,308 121,578
$ 291,196 $ 307,669 $ 557,848 $ 583,490
OPERATING INCOME
Specialty Foods $31,096 $34,296 $57,409 $60,572
Glassware and
Candles 6,764 5,896 9,870 9,973
Automotive 3,804 4,541 7,455 8,444
Corporate expenses (1,516) (1,682) (2,948) (3,138)
$40,148 $43,051 $71,786 $75,851
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, June 30,
2003 2003
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 152,505 $ 142,847
Receivables - net of allowance for doubtful
accounts 106,288 88,583
Total inventories 150,674 159,412
Deferred income taxes and other current assets 26,780 23,543
Total current assets 436,247 414,385
Net property, plant and equipment 167,557 161,111
Other assets 101,210 92,220
Total assets $ 705,014 $ 667,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,410 $ 41,983
Accrued liabilities 50,175 42,940
Total current liabilities 91,585 84,923
Other noncurrent liabilities and deferred
income taxes 37,044 35,128
Shareholders' equity 576,385 547,665
Total liabilities and shareholders' equity $ 705,014 $ 667,716
SUBJECT TO YEAR-END AUDIT.