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Lancaster Colony Corporation. (LANC)
F3Q10 (Qtr End 03/31/10) Earnings Call
April 29, 2010; 10:00 am ET
Earl Brown - IR
Jay Gerlach - Chairman, CEO, President and Director
John Boylan - VP, CFO, Treasurer, Assistant Secretary and Director
Mitchell Pinheiro - Janney Montgomery
Greg Halter - Great Lakes Review
Previous Statements by LANC
» Lancaster Colony Corporation F4Q09 (Qtr End 06/30/09) Earnings Call Transcript
» Lancaster Colony Corporation F3Q09 (Qtr End 03/31/09) Earnings Call Transcript
» Lancaster Colony F2Q09(Qtr End 12/31/08) Earnings Call Transcript
Thank you and good morning. Let me also say thank you for joining us today for the Lancaster Colony third quarter fiscal 2010 conference call. Now please bear with me while we take care of a few details. As with other presentations of this type, today's discussion by Jay Gerlach, Chairman and CEO, and John Boylan, Vice President, Treasurer and CFO, will contain 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. These 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 include but are not limited to risks relating to the economy, competitive challenges, changes in raw materials costs, the success of new product introductions, the effect of any restructurings 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 Form 10-K.
Please note that the cautionary statements contained in the Safe Harbor paragraph of today's news release also apply to this conference call. Now here is Jay Gerlach. Jay?
Good morning, and thank you again for joining us. We are pleased to report overall sales growth in our non-seasonal third quarter of just under 2%. While our Food segment sales were close to flat, the Glassware and Candle segment again provided all the sales growth. Profitability improved in both segments resulting in total earnings per share of $0.86 versus $0.76 last year. There were no share repurchases in the quarter. Capital expenditures reached $4.4 million in the quarter and $8.1 million for the nine months. We anticipate somewhat less than $15 million for all of fiscal 2010. Specialty food sales were close to flat, down $423,000 with retail channel sales up about 6% while food service channel sales were up just over 6%.
Pricing was down about $6 million, mostly food service and largely due to lower commodity costs. While difficult to estimate, the earlier Easter this year helped retail sales by perhaps $3 million to $4 million. Year-over-year, the quarter's operating margins benefited from a higher retail sales mix as well as lower material costs estimated at over $7 million. However operating margins in the quarter of 17.9% were below the 23% second quarter margins as increased promotional spending, both to the trade and consumer higher marketing costs and product recall costs all contributed to bringing down our operating margins from their peaks.
We did see a need to react to some competitive situations which drove up our trade promotion spending. At the same time, we were increasing our consumer spending to support our key brands especially during the Easter sales period. Sales mix in the quarter was 53% retail compared to roughly 50% a year ago. We saw growth in each of our key branded retail product lines, Marzetti refrigerated salad dressings and veggie dips, Texas brand croutons, and Sister Schubert brand frozen dinner rolls and New York brand Texas garlic toast.
Glassware and Candle. Glassware and Candles segment sales were up 16% in the off season quarter. The growth drivers included the benefit of recently introduced products, good candle sellthrough during the holidays creating post seasons orders and continued strong sellthrough in our key mass channel customers. Higher capacity utilization, good operations and lower wax cost contributed to the earnings improvement. Now let me ask John to make a few comments.
Thanks, Jay. Let’s start out by discussing several key components of our consolidated balance sheet. Accounts receivable at March 31, 2010 totaled $80,011,000. This amount represented a 31% increase over last June’s total and was 11% above the level of last March. The relative strength and timing of the quarter sales including that of March in particular led to this growth.
With respect to our inventories, the consolidated total of approximately $97 million at the end of this March reflected somewhat decrease of about $5 million or 5% from the level of this past June. On a year-over-year basis, our March inventories increased about $7 million or 7% as we've begun building some candle inventories to meet anticipated increased demand.
As it relates to our capitalization, we continue to have no debt and as of March 31st our shareholders equity exceeded $475 million. With cash and equivalents on hand of over $95 million, we remain well positioned to meet our foreseeable cash needs and retain flexibility to consider business acquisition opportunities. Echoing the observations of others, at least compared to a year ago we do seem to be seeing more proposed transactions coming our way which is encouraging.