Lancaster Colony Reports Third Quarter Sales and Earnings
COLUMBUS, Ohio, April 29 -- Lancaster Colony Corporation today reported net income of $16,045,000 or 45 cents per basic and diluted share for the company's third fiscal quarter ended March 31, 2004. For the corresponding quarter a year ago, net income totaled $18,047,000 or 50 cents per basic and diluted share. Third quarter net sales increased four percent to $269 million versus net sales of $260 million in the third quarter last year.
Net income for the latest quarter included pretax income of $0.8 million (one cent per share after taxes) related to the liquidation of LIFO inventories carried at substantially lower prior years' costs. In the third quarter last year, net income included a similar LIFO pretax benefit of $2.4 million (four cents per share after taxes).
For the nine months ended March 31, 2004, net income reached $62,395,000 compared to $90,582,000 earned in the first nine months a year ago. Diluted earnings per share were $1.74 compared to $2.49 a year ago. Nine months net sales were $827 million compared to $843 million last year.
The most recent nine-months results included pretax income of $2.0 million (three cents per share after taxes) associated with a second quarter distribution under the Continued Dumping and Subsidy Offset Act (CDSOA). In the prior year, the pretax CDSOA distribution was $39.2 million (67 cents per share after taxes). Also received in the current year's second quarter was a pretax bad-debt recovery of $1.2 million (two cents per share after taxes). Pretax LIFO-related income for the nine months totaled $3.4 million (six cents per share after taxes) compared to $5.1 million (nine cents per share after taxes) in the corresponding period a year ago. The prior year's nine months results also included a pretax provision of $4.9 million (eight cents per share after taxes) for the restructuring of the company's consumer glassware business.
John B. Gerlach, Jr., chairman and CEO, said, "We were pleased with the third-quarter growth in sales and operating income that was achieved by our Specialty Foods group. Consolidated results remained challenged by weaker nonfood volumes and by higher materials costs, especially for soybean oil and dairy-related ingredients."
Specialty Foods sales in the third quarter increased 11 percent to $157 million with both retail and foodservice volumes running ahead of the comparable quarter a year earlier. Operating income was up three percent to $24.1 million. Mr. Gerlach said, "Nearly a third of this segment's sales increase was attributable to Warren Frozen Foods, Inc., acquired in December 2003. Historically high costs of soybean oil adversely affected our dressings and sauces margins and had an impact of more than $1 million in the third quarter and over $4.5 million in the nine months."
Automotive sales declined seven percent to $57 million in the third quarter. Operating income for the quarter declined to $2.0 million from $4.9 million a year ago. Mr. Gerlach stated, "Similar to the second quarter, our sales were affected by the loss of an OEM program for aluminum accessories that was not fully offset by other gains. Raw materials costs remained above year-ago levels, and lower floormat production affected overhead absorption."
Glassware and Candles sales totaled $56 million, a three percent decline. Operating income for the quarter declined to $1.1 million versus $2.3 million in the year-ago quarter. In addition to the varying amounts of LIFO-related income, operating income comparisons for the third quarter were affected by the $1.4 million prior-year impairment charge related to certain glass molds. Mr. Gerlach stated, "Although retail candle demand remains unsettled, our third quarter candle sales comparison was favorable. The prior year's volume also benefited from the introduction of a broad new line of Candle-lite candles. For this segment, lower production and competitive pricing have led to compressed margins. We believe our candle operations are more efficient than a year ago, and we continue our efforts to sustain improvement in our consumer glassware manufacturing."
Mr. Gerlach concluded, "We were pleased to return to top-line growth in the third quarter. A current concern is the continuing trend toward higher materials costs, particularly food ingredients. Warren Foods performed to our expectations, and we look forward to expanding the market presence of Warren products. We continue to focus on new product development, and we recognize the need to reduce our costs, especially in our nonfood operations where growth is most challenging. Looking ahead, we believe our debt-free balance sheet and solid cash flows provide a firm foundation for future growth."
The company's third quarter conference call is scheduled for this morning, April 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. Replays of the webcast will be made available on the company 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 has 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 Nine Months Ended
March 31, March 31,
2004 2003 2004 2003
Net sales $ 269,463 $ 259,535 $ 827,311 $ 843,025
Cost of sales 219,659 205,962 656,649 657,534
Gross margin 49,804 53,573 170,662 185,491
Selling, general &
administrative
expenses 24,401 24,629 73,473 75,751
Restructuring and
impairment charge -- (84) -- 4,861
Operating income 25,403 29,028 97,189 104,879
Interest income and
other - net 457 (47) 3,283 40,407
Income before
income taxes 25,860 28,981 100,472 145,286
Taxes based on income 9,815 10,934 38,077 54,704
Net income $ 16,045 $ 18,047 $ 62,395 $ 90,582
Net income per
common share:(a)
Basic $ .45 $ .50 $ 1.75 $ 2.49
Dilute $ .45 $ .50 $ 1.74 $ 2.49
Cash dividends per
common share $ .23 $ .20 $ .66 $ .58
Weighted average
common shares
outstanding:
Basic 35,736 36,013 35,740 36,310
Diluted 35,814 36,064 35,814 36,366
(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 Nine Months Ended
March 31, March 31,
2004 2003 2004 2003
NET SALES
Specialty Foods $ 156,748 $ 140,959 $ 475,453 $ 452,908
Glassware and Candles 55,658 57,274 184,493 207,237
Automotive 57,057 61,302 167,365 182,880
$ 269,463 $ 259,535 $ 827,311 $ 843,025
OPERATING INCOME
Specialty Foods $ 24,085 $ 23,342 $ 81,494 $ 83,914
Glassware and Candles 1,147 2,279 11,017 12,252
Automotive 2,025 4,937 9,480 13,381
Corporate expenses (1,854) (1,530) (4,802) (4,668)
$ 25,403 $ 29,028 $ 97,189 $ 104,879
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, June 30,
2004 2003
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 159,377 $ 142,847
Receivables - net of allowance
for doubtful accounts 106,195 88,583
Total inventories 148,852 159,412
Deferred income taxes and other current
assets 28,635 23,543
Total current assets 443,059 414,385
Net property, plant and equipment 163,665 161,111
Other assets 103,254 92,220
Total assets $ 709,978 $ 667,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,708 $ 41,983
Accrued liabilities 45,136 42,940
Total current liabilities 87,844 84,923
Other noncurrent liabilities and deferred
income taxes 38,799 35,128
Shareholders' equity 583,335 547,665
Total liabilities and shareholders'
equity $ 709,978 $ 667,716
Subject to year-end audit