Lancaster Colony Corp. (LANC) Misses Q3 EPS by 5c, Beats on Revenues

Lancaster Colony Corp. (NASDAQ: LANC) reported Q3 EPS of $1.00, $0.05 worse than the analyst estimate of $1.05. Revenue for the quarter came in at $296.2 million versus the consensus estimate of $291.65 million.

• Consolidated net sales increased 0.8% to a third quarter record $296.2 million versus $293.8 million last year.
• Retail net sales were essentially flat at $152.0 million. Sales of shelf-stable dressings and sauces under license agreements remained a growth driver while frozen bread sales volumes declined from the prior-year quarter as we recovered from the disruptions in the supply of our garlic toast products. We implemented pricing actions for our primary refrigerated produce dressings and dips as planned, but our net price realization for the quarter was marginalized by offsetting trade spend, including our previous commitments to retailer promotional activities.
• Foodservice net sales grew 1.5% to $144.2 million driven by pricing actions taken to help offset higher freight and commodity costs combined with volume increases for frozen yeast rolls and frozen pasta.
• Consolidated gross profit declined $4.0 million to $67.9 million due to the impact of significantly increased freight charges and higher commodity costs. The Foodservice segment pricing and savings realized from our lean six sigma program served to partially offset the higher costs.
• Selling, general and administrative expenses declined $2.0 million on reduced spending for consumer promotions and cost savings gained through the realignment of our retail broker network.
• Consolidated operating income increased from $22.0 million to $37.7 million. Excluding the pre-tax charge of $17.6 million in the prior-year quarter resulting from the company\'s withdrawal from an underfunded multiemployer pension plan, operating income declined $1.9 million or 5.0%. Based on the factors referenced above and excluding the multiemployer pension plan withdrawal charge, consolidated operating margin decreased about 80 basis points. Retail segment operating margin declined from 19.2% to 17.3% while Foodservice segment operating margin improved from 9.6% to 9.9%.
• Net income was $27.6 million, or $1.00 per diluted share, compared to $14.5 million, or $.53 per diluted share last year. Note that the lower tax rate of 27.4% in the current year reflects the favorable impact of the recent federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 ("Tax Act"). The aforementioned multiemployer pension plan withdrawal charge reduced the prior year\'s net income by approximately $11.5 million or $.42 per diluted share.
• The regular quarterly cash dividend paid on March 30, 2018 was maintained at the higher amount of $.60 per share set in November 2017. The company\'s balance sheet remained debt free on March 31, 2018 with $187.3 million in cash and equivalents.

For earnings history and earnings-related data on Lancaster Colony Corp. (LANC) click here.

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