LANC - Earnings call transcript Q3 2019 | Lancaster Colony Corporation

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Operator

Good morning, my name is Jodie and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation Fiscal Year 2019 Third Quarter Conference Call. Conducting today's call will be Dave Ciesinski, President and CEO; and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise. After the speakers have completed the prepared remarks, there will be a question and answer period. you. Thank Instructions] [Operator begin of call for Investor Corporation. to Ganobsik, Lancaster is Vice President Relations the now here conference Dale Colony And and Treasurer

Dale Ganobsik

you. third quarter you call. and for Thank Colony's conference morning us Lancaster XXXX joining today thank year fiscal Good Jodie. for everyone

to Doug Program with get we appreciation Officer, provided and extend also the call thank who today. leadership want former Doug, CFO, my a moment to tenure is for Before our take and us guidance I during I us to as started, the Fell, you our Transformation on CFO. you your

As CFO. has role the with here also opportunity at I also our have you to Doug position to Tom over he Tom his here Tom, very assisting look his weeks, as to want Pigott, I several you has transitioned working been settles And into Tom welcome new forward the excited team our new we're this to into as join past to Colony. Lancaster take CFO. us. as

this that this the CEO, company's that to an our County's call is update afternoon. SEC. Dave? note With turn obligation to with ahead, in Act These and Harbor of I'll replay filings will detailed no be said, earnings Private of are morning, to remind Safe want that to Securities archived of Litigation statements, the of discussion and the the Reform call on of Ciesinski. that include statements a subject are these discussion risks cause results to these XXXX. President the risks our statements in to website undertakes Lancaster and company our based subject actual number contained call and uncertainties subsequent upon could over conjunction I A everyone events. now Also which Dave uncertainties today and the this audio company's may Moving differ materially provision lancastercolony.com with available later forward-looking

Dave Ciesinski

Thanks review good to morning It's great also fiscal everyone. as here our we third to Tom our results to It's Dale team. for be today welcome pleasure XXXX. and quarter my with you year

of on which ERP move Transformation to company's as opportunities As the integration serve XX, efforts, position Colony Doug X coordinate transitioned of CFO to Program Office, his to a lead Transformation effective various Program reminder, April us as March evaluation TPO announced towards new XXXX a will capital platform. the establishment newly from the the a and appointed Officer. Lancaster including the Fell

during leadership to qualified has which over Pigott Group Meal third Tom President of service experience and all professional quarter food CFO. XX his for XX as Ingredients. lead experience of our Effective as a where Operations as years appointed the Pizza in worked X, together. Kraft our recently in I Today, Solutions our industry Nestle outlook. finance veteran prior TPO. the us, MGP of and President we positions, CFO Doug's also with years Division CFO USA's Division on His and Foods April and comments he make and our experience Tom Finance him of Vice I Vice most our accounting Vice Beyond served also will includes results roles of and is fiscal provide other President as served Tom and Tom of and Senior uniquely with

I Doug to any will Following and respond your that, Tom, to questions. happy of be

versus record X.X% last $XXX.X For the a $XXX.X million to consolidated quarter net quarter third sales million year. increased

during increased sales quarter, of to million. XX net attributed sales basis consolidated of Bantam both net acquisitions to closed sales Retail second points our net Baking Bagels Excluding the improved Omni $XXX company, X.X%. and fiscal which

net sales contribution incremental Bantam the $XXX.X retail million. Bagels, essentially at Excluding from were unchanged

shelf-stable flatbread and impact bread and holiday, garlic offset lower frozen under of this Easter the from exit our by of resulting benefited sauces dressings lower the net later segment, agreements sales sold sales, reduced year's and favorable business. increased million. inflationary were decision sales some license sales trade As realization, selectively coupon attributed reduced spending, to margin and net Retail from expenses. pricing, XX.X% $XXX.X to Foodservice price low sales private also grew to label In net

and our and impact growth Excluding quarter and in that partially higher lean support the as the to by Omni a we of brand and million Most Foodservice Bagels ongoing Bantam supply recent higher disruptions. investment chain due pricing. continued investments million led level reflect by expenses distribution of expanding higher tools attributed operations, were on warehousing and $X.X X.X% brand support the as Bagels sigma Baking prior spending These driven restaurant by net costs pasta impact by sales higher SG&A and to New retail at Bakery acquisitions, investment period program, the Consolidated XX% inflationary for York withheld gains products. for influenced key increased initiatives the people cost. gross overall for SG&A in retail year, increased trade also from integration volumes, marketing. expenses to notably profit Bantam to accounts in brand six acquisitions. of offset Omni sales the national to our our Baking $XX.X frozen sales improved cost savings for increased

at tax lower factors million share, to that Net primarily $XX.X prior $X.XX XX, XX.X% diluted referenced As share November these million. the million regular $XX.X on year, above, the per prior or of consolidated The of rate Cuts reflects the share the impact of cash influenced Tax higher XXXX. XX.X%, at current set and the or Jobs level million of the dividend operating Act income was year. XXXX. maintained compared year's diluted of $X income XXXX paid overall compared of favorable per quarterly was rate Note was by $XX.X the in year versus $X.XX $XX.X to in March per essentially last flat

the sell-through XXXX, for XX, IRI key retail in our XX from all Turning our March ending of maintained weeks to six we leadership position our categories. attention data

the target increase saw share position a to categories in I'd With the two turn in and six sheet a now like six due to quarter, reduction due – in of we the activities. Tom trade balance out share the on to we that, three related over pullback modest to make of items. – comments our and to it targeted to some were During categories able other

Tom Pigott

and million, paid and dividends in of in million, follows: meaningful the cash the by paid cash reflects volumes Bantam for summarized balances $XX with XX Consistent acquisitions Dave, acquisitions second June the general, impact sheet Omni million our past and during a remains cash morning. $XX capital strong. Baking sheet sales of cash of receivable provided in-line an decrease million offset balance brief fiscal fiscal $XX since Cash as more balance year-to-date the Bagels perspective, commentary, June additions since you, $XX and property From in can regular increase a our I'll high-level of by few Thank expenditures good and More of remained very balance the in balance our with changes quarter, expectations. XX. all on comments make for our specifically, $XXX the nearly decline period. of In and be our our activities in million. accounts the operating our

with with are and consistent also prior outstanding consistent Our hand inventory are past days expectations quarters. quarters. with on days Inventories in-line are also sales

Sister we capacity to Schubert's we continue focus Consistent $XX our As in expect additions XXXX expansion million. for expenditures of three to production quarters, property We through increase approximately XXXX. fiscal projects million. cash including I for our be near fiscal that mentioned past estimate with project commentary, to and expenditures $XX totaled total capital productivity, to our the be mid-point on capacity

in cash With two our payable related and under to since our days. team the equivalents. Omni expand allowed at to has reflects to debt Bantam in transactions terms capacity for accounts amortization by our us date with Including balance automation vendors, Our and packaging expense expense end in we payable level quarter a related reduce our remained opening with and our million conversion respect payment of depreciation million. fiscal free a accounts innovation acquisitions later to quarter, the Borrowing and and increase Depreciation to amortization cash our variety June the with agreement of about same in the our – quarter. center we the remain The of totaled assets projects. completed $X.X two line the targeted other intangible and fiscal goodwill increase of capitalization which our impacts in million $XXX at $XXX this we The our remains our procurement as credit QX. fiscal fourth addition our the continued ongoing acquisitions. emphasis sheet assets cycle two and to fourth reflects second and anticipate our by

as and the broadly Tax Cuts quarter was Finally, and expected Act. speaking impacted third for income provision our favorably by tax Jobs the

tax taxes, third was stock for award activity. of the reflecting offset XX%, federal rate state employee and partially Our quarter the favorable impact by

estimate quarter to at rate fourth we forward, be time, Looking the this tax effective our XX%. for

of favorably and again timing employee the However, ultimate stock tax our magnitude influence rate. may award activity

joining turn concluding his this will I back comments. the morning. over you now appreciate us for we to always, Dave As call

Dave Ciesinski

segment. results, To quarter the Tom. for pleased sales Foodservice quarter we to led our third net Thanks record recap were report our by

cost we savings successful six of lean for to anticipated placement for had of another Bantam Omni the Bagels. quarter Our cost that sigma product the and and program Baking help higher with marketing integration the and incremental expenditures offset operations support completed

to to a of year. remainder attention relevant update to that our our the key QX, on you Turning items I'd are like few fiscal

fourth benefit shift we the sales of First, excuse will from for or Easter. quarter timing me, the expect in the net – first that quarter

costs commodity we expect to and inflationary. packaging modestly Second, remain certain

Third, XX, ending both acquisitions. we of figure program outlined quarters sigma Bagels we fiscal the frozen three the anticipate call, the businesses Baking bullish Omni in these both another seven range year. invest achieved earnings six XX our Bantam through as we retail category continued are future. extremely for their quarters the and number in Having expect sales the in for Bantam Bantam Case our drag remain to weeks and QX from in in strategically one Bagels on mid Fourth, bagels. that, lean a to said we in this of we Omni finished March on modest first cost continue point, have we as during few savings

Finally, any to be This modest of continue as strategic TPO initiatives business. your today. to third at our we concludes prepared long-term level than albeit personnel our or SG&A we'd as we in be happy invest such And growth elevated, answer a more the for quarter our the remarks to of questions. to expect drive

Operator

of from Our is line of line first comes Please open. Sidoti. Frank the question [Operator your ahead, Camma go Instructions]

Frank Camma

Good Thanks morning for the guys. taking question.

Dave Ciesinski

Good morning, Frank.

Tom Pigott

Frank. morning, Good

Frank Camma

Hi.

overall do six cost the reducing on the sigma program. just company. or impact reducing we on First to an have over margin improving Over greater that it's where more obviously gross I sales costs, your question SG&A, of But is impact or time, the expect your fixed SG&A? entire assume the time the of

Tom Pigott

goods Biggest of Great cost remains opportunity sold. our single question, Frank. in

$XXX target that is showing say, using at we'll we As – line, or to SG&A you consultant some spend what it's a hitting on line. you're cost. know up a spend our some huge – for, are as of the that, said roughly huge specific are gross But be go. But otherwise. G&A expenses be the that and a In us to the just we're cases, of let's benefits in there Having help where seeing remains G&A profit cases it's if the with the it million is, spend gross get the opportunity. profit the showing up end, target respect the in remains in IT

into are space that are We looking at selectively things now. down the SG&A

the of our it indirect opportunity magnitude than example, profit is the just but order in area. smaller the gross For some of there of spending, is

Frank Camma

Okay. I That's thought. what Fair enough.

you is same And if take compare, to that makes difficult $X.X the that the I Omni right, revenue, in that apples-to-apples words, so, booking a out know million awash, expense essentially basically go it's also I are forma, to little – but as the other bit does right... through was but margins pro to have

Tom Pigott

that's Yes, yes. essentially

You purposes and can – it's for all breakeven proposition. a intents

Frank Camma

Okay.

Tom Pigott

upgrading simple we and we I had go the think margin beyond to that the for into All what's going beyond factory we're when that do making example, and we've it's the the a we're dilution outlined sale, as that on that and we that, of factory capitalizable. bought those factory bought facility. just what is, before, upgrades include things are investing just

cases some improvements have hitting and if change that expense In in example, in we're what we is if work expensed. For doing. of make going fix other go underway. required of you we but the we we're point, having wholesale of do line the you floors, out to the somewhat are and case scope that in machinery that's you nature because but small, go To give is just what be and to

is just hit going and coming huge way. our If prepare and the of that's some talking you're build as to If something approach when it's at standards one greenfield transitory it of of to that we're It's it, factory the quality doing million drag of which what capitalizable. a for factory, have paying But unfortunate all food I the order in going look the go the the to spent, that overall it facility. the This of know swaths what from would we're in making what been we're still have and if exactly replace cost hit in with you're scratch, up a probably have think to of perspective future. business. I tried things safety we're in resulting a economics and that were the of it is I to floor, on works the sort much capitalized. cost lot investments that your going wholesale about see don't would would why about. from be you But to on one-fifth would floor expense when more think we to and of we But acquisition, end facility, it get we the there talking of line. the a is, $XX a from to be up get we to those going going

Tom Pigott

yes, the effectively that sales So Foodservice in awash Frank, so are segment. are the

Frank Camma

Right.

Tom Pigott

to upgrade is we're facility the investments that making or hitting cost But that retail.

Dave Ciesinski

a by That's Tom. great That's clarification right. exactly

Frank Camma

Okay.

they going Okay. impacted would the sequential what operating That's more be was there, I look to, at you because like, than margins get to if you to seem expect.

So that, sense. that makes

Dave Ciesinski

Yes.

at in drag you If where disproportionate business terms are both today. acquisitions, the both those on investing of look retail of we're

York business co-packer our retail we First was for a that, Toast business. supported bought our that and Texas the New

Bantam the that putting business. where invested hitting have and the trade and business. are costs drive again, those that's So disproportionate expand in we weight There to in And distribution other is on retail to marketing trial.

Frank Camma

a I to of price you Would able of of, you like those, through but sense six [granted capitalization be give many impact for just us P&L? that I how know] mean, would going quarters sort expense versus the

Dave Ciesinski

understanding on more going it we in you little served quarter, Omni think Well, particular And second a we year. bit it say doing. bit referred to the been – we us a probably our I probably would probably in mid-point of explain to fiscal call have well a our next would little take to in the give what better we're guys to of it's probably I through

makes proposition. way on in up bullish remain sense, economic the the we it's a We business. the of showing again, So, it's ton just believe it

Frank Camma

last please. my one hop and And I'll of Okay. then

previous it's Just that $X of been quantified the is some in expect that what retail can sort impact $X of Easter million, generally think somewhere calls is time? around this the and million we of range to you've I –

Dave Ciesinski

because maybe little higher late year. so, even this think I Easter was a so

Frank Camma

Right.

Dave Ciesinski

really X, sort one around years, I before was most... other. this have switched it X, partially XX falling year you April last been of quarter past, was the or think April on have versus April in This other year April might You about where that in year may in and it years the think shipments, it between have XX, might – year

Frank Camma

much pretty it's Yes, latest. latest. the The

Dave Ciesinski

about, in So, of to higher be that range your you're the end high]. range talking that it's but going remains [the

Frank Camma

Okay, thanks guys.

Dave Ciesinski

That's also as retail just item proportionately well. a

Frank Camma

Right, you. Thank right.

Dave Ciesinski

Frank. Thanks,

Operator

line [Operator our from Consumer Instructions] go And West the next of your Chase is ahead, question Please Edge comes Research. line of open.

Chase West

the for thanks question. Great,

retail suggests the Wings Just data throughout quickly, on quarter. Buffalo can a Our random the update sauces Wild the you provide an distribution and rollout?

could story dressings? inning Garden in? guys what similar you In to maybe the Olive maybe distribution in say distribution we longer So, are expect term,

Dave Ciesinski

that question. great Chase, That's certainly that's working towards. Well objective we're

So, you update. I'll give an

the you it and agreement that's it's probably in and saw Wild number to that Inspire data, of Today continue a the perform and Brands. we a have only available in per ship at As we in syndicated to retailers, particularly item continues three-pack our place Buffalo with well. Wings

has. bottles. expect it time, are able see in like We we've place of we working been At process to in which the like see three-pack to proposition beyond individual would do Garden to Olive take really a them to the at point with a transition off

Buffalo So, of are with plate number in in important with their underway their we're are their to continuing those and change and a that, transition have a work them. things on ownership they dialog Wings that on talks through Wild actively strategy, different with

we're bullish about So, well. bullish about are quite retailers it, it our as

it, just their things I think other they're working through bullish working they're two of important very about on. it they're

Chase West

then very just QX. center to the quickly, Thanks. That's is it. Got due And I believe helpful. completed in be innovation

Going the time? sales percent a in maybe for innovation increase top-line have do innovation? over term, contribution forward, you target should expect to an And of guys we longer then

Dave Ciesinski

budget. hit I on believe, Chase, so it to sequence. June it, the of time tell scheduled open kind XXth, I would on remains I them and you, on We're in

going We and already are set next customers in out through of really the it visit to in appointments and we it to of walk what quarter view fiscal. open Foodservice see to for with on to retailers number we Even customers. up like from first looks a it, retail do have that into cornerstone construction had albeit have quarter, folks and We with an really a folks we're as invitation the it. both last to out call come what the

it relevance rate be increased on innovation, the if that and peg customers. it has I I if didn't that, an disappointed I level a result our innovation that, to think didn't would disappointed In but accelerate impact know ultimately I our be we our disappointed. terms unequivocally is increased of of say important would it would if specific And that target I team don't of to would in rate. would be

Chase West

you data maybe lastly the just level, a maybe through guys then continues to opportunities Foodservice or And attacking Are impressive. for in be that the thanks. is tool left branded be like still, higher runway Great, about great. At we me. been could walk that Foodservice? you would a can some other still any the think space of products type you've very And there using? internal just longer-term white way with Thanks. for opportunity

Dave Ciesinski

Yes absolutely.

remain opportunity. about we So, bullish the

If and function in of quarters our is a accounts the coming growth is our of about think you of business, that national a three today as priority. business real lot

with I gives year, those both think an We're portfolio. that In we one we chain us we've mentioned in syndicated that some and like winners. of traffic have winning things of level sales. feel data that we've done the invested we the before advantage is by tools last have

beyond and strategic growing go become who the chains. top or can back up we the even XX. just we've and understand more coming And about So, XX targeting is ten, top top the or much

I XX, honestly, I not double-digit to that it's of just white continues think the know, in demonstrating there them some names, mention as be to XX growth. but are believe high And in XXX we space, consistent say won't that you let's So, maybe but the that group well. chain in more top

colleges also And barbecue within have in universities, we suited sauces Blends. we've initiatives last uniquely One range heath remain this Simply that We've of includes packets includes a expand in just and other that of us think we is space, bullish two non-commercial. to about opportunity to care. in our other talked call had continue also savory that and last helped products branded universities. quarter, part line target and that of is our forms business. the that's healthcare we've That it launched colleges We sauces year and and the on the Bold Dressed

think shipped a a that's we're looking to mean solutions. space starting, great third going help be in are that after literally us non-comp product few just our for I to we healthier cases quarter. So, where really go We consumers range

a lot So, continue we there. to headway of I see may... grow to

Chase West

for Thanks the Great. question.

go Okay, ahead.

Dave Ciesinski

Chase, even to against biased Foodservice end has Foodservice to margins folks our in happening what's a expanding been big you in an and automation the going, date for of but factories, of dressing a are part seen of six course been business. line over activities lean dressings you Just is you've of have know, our our dip benefit there and on of our lot of business, heaviest the a [indiscernible] and our the date benefit that lot falling sigma and has the to of been principally time,

Heights lifting shifting of [dough some we expect to we at sort Omni, see of Texas to of also own York make also the we're where focus Toast benefit. factories], think but our where of think facility Now, can same and look sort of Bedford that New

Chase West

color. I'll so it. Got Thank all for the it much on. pass you

Operator

If no Mr. back will questions, for comments. call concluding Ciesinski there turn his now further we are to the

Dave Ciesinski

thank joining we'll quarter us when We to talking fourth share Well, with for about in look August our information you results. forward more today. you

Operator

call. conference today's concludes This

You disconnect. may now

Lancaster Colony (LANC) 25 Apr 192019 Q3 Earnings call transcript