Lancaster Colony Corporation (LANC)
F3Q13 Earnings Call
April 25, 2013 10:00 AM ET
Earle Brown – IR
Jay Gerlach – Chairman, CEO and President
John Boylan – VP, CFO, Treasurer and Assistant Secretary
Alton Stump – Longbow Research
Greg Halter – Great Lakes Review
Previous Statements by LANC
» Lancaster Colony's CEO Discusses F2Q13 Results - Earnings Call Transcript
» Lancaster Colony CEO Discusses F1Q2011 Results - Earnings Call Transcript
» Lancaster Colony CEO Discusses F4Q2010 Results - Earnings Call Transcript
» Lancaster Colony Corporation. F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
Good morning. Let me also say thank you for joining us today for the Lancaster Colony third quarter fiscal 2013 conference call. Now please bear with me while we take care of a few details. As with other presentation of this slide, today’s discussion by Jay Gerlach, Chairman and CEO and John Boylan, Vice President, Treasurer and CFO will contain any forward looking statements of what may happen in the future, including statements relating to Lancaster Colony’s sales prospects, growth rates, expected future levels of profitability as well as the extent of share repurchases and business acquisitions to be made by the company.
The forward-looking statements are based on numerous assumptions and are subject to uncertainties and risks. Accordingly, investors are cautioned not to place undue reliance on such statements. Factors that might cause Lancaster’s results to differ materially from forward-looking statements including, but are not limited to, risk relating to the economy, competitive challenges, changes in raw materials’ costs, the success of the new product introductions, the effect of any restructuring and other factors as are discussed from time-to-time in more detail in the Company’s filings with the SEC, including Lancaster Colony’s report on the Form 10-K.
Please note that the cautionary statements contained in the Safe Harbor paragraph of today’s new release also acquired to this conference call. Now here is Jay Gerlach. Jay?
Good morning and thank you for being with us. Our third quarter results, our total sales growth is 3% driven by 4% Food Segment growth and a slight decline in Candle and Glass sales. Earnings per share reached $0.80 versus $0.67 last year, an increase of 19% with both segments improving our earnings from last year’s third quarter.
While no shares were repurchased during the quarter we did invest approximately $9 million dollars in capital projects with the major investment being to expand our crouton capacity which was completed late in March.
Our Specialty Foods segment had a strong quarter particularly considering it is our seasonally weakest quarter and the overall environment continues to reflect an unpredictable consumer. Segment sales of $247 million dollar were our third quarter record. The sales growth rate of 4% was largely volume-driven as pricing contributed less than one-half of 1%. With Easter timing being somewhere last year we feel the holiday had no material impact on the quarter.
Our newer product lines of Simply Dressed refrigerated salad dressings and New York Garlic Knots continued to be good contributors. We also saw a good growth from our overall New York Garlic – garlic bread line and a good Easter season for Sister Schubert’s dinner rolls. Veggie Dip sales were impacted by our repackage – by our packaging restage which created a gap in demand as we switched over to the new – new container at retail. Croutons were affected as well since we had backed off our promotional activity in advance of some downtime around our expansion project.
Looking at 12-week IRI data through March 24, you see the following for our key categories and brands. Refrigerated salad dressing that category was up 4%, Marzetti is up 5.9% we were tied dead even with (inaudible) for the category leadership position. Crouton category was down 1.4% our brands were down 5% we maintained our number one position. Veggie Dip side the category down 4% the Marzetti brand is down 3.5% again maintained our number one position. The Frozen Garlic Bread category down 2.5% our New York brand down 4.5% we maintained our number one position. Dinner rolls are – the category was up 3.3% our Sister Schubert brand up 3.7% we maintained our number position.
Operating margins in this segment reached 13.6% up from 12.5% last year in addition to sales volume growth, earnings were also helped by lower coupon redemption costs and a more favorable sales mix as retail channel sales outperformed good service channel sales which were relatively flat. Material costs were favorable by almost $2 million dollars we did have some modest figures start-up related costs for our new crouton capacity project and a bit higher freight costs in the quarter. Overall, a strong third quarter for the Food Segment.
Well, the Glassware and Candles segment had a modest sales decline, earnings improved a bit and we saw an operating margin of almost 5% up from 2.9% last year a stronger sales mix and somewhat lower product placement costs were the primary contributors to the earnings gain.
Let me turn to John now for some comments.
Thank you Jay and good morning. First and briefly reviewing several notable aspects of our balance sheet, accounts receivable at March 31, 2013 totaled $91,705 million somewhat similar to last year the March level was significantly above that of the prior June total mostly reflecting the relative strength of sales toward the end of this year’s March quarter compared to the quarter ending last June.