LANC - Earnings call transcript Q4 2019 | Lancaster Colony Corporation

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Operator

Good morning, my name is Jason 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 Fourth 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 their 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, fourth quarter you call. and for Thank Colony's conference morning us Lancaster XXXX joining today thank year fiscal Good Jason. for everyone

include and Safe Reform begin me Harbor the Securities subject uncertainties Litigation may the subsequent provision of everyone could which undertakes XXXX. are discussion these to this that of results Let a differ statements, are no update our risks to subject of statements actual Act These that remaining morning by number forward-looking to to events. upon the Private cause materially company statements and based obligation

the audio with that available A lancastercolony.com Also this note of company's replay at SEC. site later detailed be of contained afternoon. filings the risks discussion the archived the these call and this will uncertainties Web and company's in is

the that Colony's turn With to CEO, I'll and Ciesinski. Lancaster President said, Dave? now call over Dave

Dave Ciesinski

Thanks results Dale as fourth pleasure our to we XXXX. review good here quarter a with you be fiscal today year morning. for and It's

Tom 'XX be full following fiscal will the year we for year your and quarter to the and provide comments on will any respond happy I to that of outlook, the questions.

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

our quarter, to and second Baking which Omni during attributed acquired company X.X%. Bagels sales Bantam of net net fiscal sales Excluding were consolidated increased both

dressings dips frozen offset in $XXX.X sales shelf-stable and impact margin X.X% some net to bread from by Bagels, net label selectively Bantam our decision declined the rolls, declined and were exist Retail wraps, low contribution flat realization improved to in the gains X.X% million refrigerated of declines excluding the sauces by net incremental and business. the price sales as retail dinner

X.X% million net XX.X% net gain Foodservice increased year's X.X%. to net from growth the segment's fourth foodservice quarter. strong XX.X% Baking; $XXX.X last The sales Bagels sales of and follows in excluding Omni impact grew in the sales achieved Bantam organic

gains national segment pasta including Higher sales restaurant products. resulted branded from volume and Foodservice accounts, throughout frozen products the chain

Consolidated $XX.X to Bantam program in increased and net operations lean savings the to transportation, Foodservice, Baking million by impacted procurement, Retail. attributed Bagels improved to to gross investments expanding unfavorably million in price of volumes sigma Omni cost and sales Gross manufacturing six retail in profit by realization profit distribution was in addition $X costs support improved driven

approximately from points gross XX decreased the by basis of to businesses. driven Consolidated profit two headwinds basis recently XX.X XXX acquired from XX.X

expenses SG&A included Fourth higher million $X.X attributed Bantam quarter chain items and increased investments let the have in expenses innovation our for startup one-time our newly and Bagels $X million costs incremental initiative, other opened in increased to supply to including IT center. capabilities, for spending costs ERP SG&A

The moved Alabama. in was Production facilities impact to a that $X.X impairment the ceased frozen non-cash company’s bread and at includes our mid-July result close fourth in Saraland, period, million million we as network. the incurred and reported to our the change facility contingent reduction decision manufacturing favorable quarter subsequently of in charge Angelic of consideration facility within other In for our restructuring of also Bakehouse. the for $X.X

the lower trade to costs of Retail the by aforementioned impacted higher $X.X sales Bantam income due operations. resumption for segment consideration consolidated non-cash contingent in the million quarter retail expanding the fourth bakery promotions fiscal and distribution Specific operating spending including $XX.X on prior segment the Our $XX.X flat of Angelic for York favorable Bakehouse. adversely to million operating Baking year. of the to impact was operating million increased essentially New income versus levels for income retail was Omni volumes Bagels, change

$X.X by increased by to costs partially income higher offset Foodservice the million lean program, attributed savings sales our cost million the generated sigma benefited segment as incremental volumes six $XX.X operating from to and segment In Baking. Omni

Net net the per charge by income per share $X.X diluted In compared in share, and totaled income net $X.XX income consideration share $XX.X the the million, million diluted last in million or share. the year. or $X.XX million, ERP per million Saraland share $XX diluted diluted diluted net current-year per restructuring the Angelic increased change $X.XX $X.XX $X.X while closure to decreased spend impairment the per initiative for or for fourth $X.XX and for Bakehouse by of or or quarter reduced quarter, by contingent $X.X income

ending to of attention consumption out our position IRI through for are six share we XXXX, data our our June retail able Turning increase two and in of categories six. four XX-weeks sale XX, grow for the the in to

billion full For consolidated net to X.X% a $X.XX $X.XX versus the last year year, income billion increased fiscal record year.

sales Excluding X.X%. increased acquisition net attributed Bantam sales to Bagels Baking of net Omni and consolidated the

$XXX.X profit realization. or driven by volumes to lean in from FY'XX cost and program million sales net million $XX.X improved increased consolidated price increased X.X% sigma foodservice, our gross savings the six

incremental profit to distribution Bagels and Bantam retail Omni -- Gross of warehousing higher by the expanding impacted cost for support unfavorably was cost. investments Baking operations,

spite recently the roughly basis points to the due acquired year, headwind increased For two businesses. from the points XX XX.X margin a gross to in of basis of consolidated XX.X, XXX

by driven to acquisitions two capabilities increased initiatives XXX.X and severance in growth business future of to ERP expenses support $XX.X increased IT our the and costs. initiative million including impact investments SG&A our

fiscal income the consideration $XXX million year in includes reduction for result of contingent million favorable level. XX.X increase year million, change year non-cash The for the impact was prior over consolidated $XX.X The fiscal of Angelic Bakehouse. an the the for in operating

$X.XX net year share million amount per 'XX the totaled $XXX.X or to year year. share prior per $X.XX compared income diluted Fiscal or $XXX.X of last million diluted

in $X.XX by contingent income or diluted for consideration million the In year, share. increased the Angelic current $XX.X change per net

restructuring or per and impairment share. reduced spending the by million share by net income net ERP the recharge per the While and for $X.XX diluted or $X.XX income million diluted decrease initiative $X.X X.X

it pleased net record to I turn strong Tom, our strategic sales would aggregate, performance year 'XX. for some to segment. fiscal on like by report I year context fiscal to organic over Before XXXX in foodservice we driven In the offer were

Our projects, supply line improving cost procurement year of another chain launch included and and tactical of extensive our and [ph] material examples the bidding. process more automation of reducing numerous transportation cost [shipped] system, end efficiency. operational successful yield modeling controls competitive team completed and improved Specific initiatives including new management

our facilities of one of footprint in better closure result forward. reason optimized going bread will also a frozen manufacturing The

now improved and other completed new expectations not new retail While center year innovation in the financial XXXX, strategic in did segment this including forward. year, confident will leadership I have retail fiscal going place initiatives we segment for our performance results am meet past the for that our our position the

year acquisitions that completed fiscal an 'XX, going In will important play our we role two in forward. company

New of Baking business for our a was Texas our the York, acquisition supplies assets The first that half roughly co-packer of Omni the toast volume.

As you in disruptions that might business. our co-packer recall, year impacted supply fiscal particular experienced significantly this 'XX

fiscal bought into our the from the and year 'XX, In factory network. owner we folded it

and come. quarters, will years in the will implementing a During our it upgrades ensure supply that help been many team of chain to has capable remain scalable that automation reliable factory source at the last for supply two

we year 'XX roughly QX of alone, million In Omni. or expenses incremental $X.X headwind to experienced fiscal tied

to it to approximately working incremental half expenses. and us this earnest to resulted say year, it million full the year in the of of we are in $X Suffice second behind fiscal improve get in For expected 'XX.

are access items fast us QX that that large Bagels, manufacturer with and Bantam fiscal breakfast year 'XX, a the a also growing of to completed In retail both fast we sold provide frozen baking category. and growing foodservice acquisition of in will

loss million invested in business. top-line as Bantam the driving QX in we of $X.X While approximately future is of we very growth, an sustained strong operating the

this line plan them a expect until operating end to income to be We the continue around and we of on that calendar complete XXXX. automated is drag new year to move underway

these acquisitions we important will creating as on Although our believe business, long-term term serve for are short- growth. cornerstones both two dilution our

us initiative ERP replace we installed that which Lastly, on commenced to fiscal 'XX, ERP current our in formally QX in our Ascent, system year will project also enable XXXX. work was

period, former the Doug team and our CIO During top put led by we our implementation at place caliber new in CFO. Fell, Durbin, Liam

a We this top-tier in also for only selected that help that ensure project RFPs have selected many will system background RFIs scalable is savings, software also a integrator. not case package we SAP come. systems years and This and a help but conducted to to and reliable drive

million In project QX, Ascent. we expenses $X.X incurred of on

now last Ascent to ramping years. two approximately We expect up which project is

the benefits you providing with our including project call complete be QX 'XX year cost, and fall. timing will a the overview of fiscal We during in more

over And Tom. with like turn that, it to I'd to

Tom Pigott

morning. Thank you, Dave and good

items. other the a cash the highlight and to on going flow of few touch company performance I'm

favorable cash $XX prior year a was or increase deferred the fiscal The benefit year. million income million taxes year-over-year value in adjustment The XX% net was favorable change $XXX 'XX the of by driven in partially consideration income. the items operating at the in increase working versus the higher capital. were flow fair offset a of non-cash These in which by liability included reduction was and contingent net

The quarter continue regards accounts and improvements a the cash we prior days. activities conversion accounts fourth increasing receivable company In inventory on drove to days X-day the in the cycle year. the reduced in days improvement payable this while capital, hand These to area. working make during versus

increase the support XXXX, capital Cave, roll of cash. in at included will to uses project Horse the growth an to facility. 'XX. $XX fiscal products million, expenditures our totaled completed This project the be property turning in Now of expansion frozen dinner In additions Kentucky

R&D addition, In dedicated benefit center both construction of will completed a that we the segments.

projects improvement. in We capacity in invested also growth to margin other in support and facilities productivity

purchased Turning of million, Dave $XX for October, mentioned. garlic company to the November a frozen the supplier million. that to $XX longtime bread in the Omni the operations in million company Bagels In acquisitions M&A, assets invested $XX purchased two of assets the our for company completing of company Baking the products Bantam

X.X% company with returning shareholders. use million strong debt and of increases 'XX to its by The dividends, balance balance continued increasing cash last dividend remains main very cash history the the million of dividend sheet. and was zero $XXX fiscal sheet resulting long cash of $XX The in on of

elevated $XXX $XX the company returns, strong will roll in dinner project in forward, Cave, projects capital to Kentucky. support Horse are completion remain million at of the Going and to facility to the expected $XX foodservice This invest invest million drive segment million growth expansion productivity our that in the includes XXXX level. for continue expenditures at frozen to the

to support Bantam growth to plan investing and dressing acquired further also capacity to recently growth are for in support We category. further our add Bagels foodservice the business

Omni leased, property previously completed building $XX for purchase was we addition, This land Baking and the In recently of the million.

for rate fourth tax year. quarter XX% the was effective for our XX% Last, the and

-- for be be at year forward we to 'XX our estimate fiscal to effective Looking this time, rate tax XX%.

you comments. call Thank I'll Dave the over now his back to turn for and concluding

Dave Ciesinski

Thanks Tom.

Providing One, focused some launched three growth grow our context implementing simplify three of three, several pillars. growth during our business growth; costs plan company consist better we've accelerate Difficulty] years, base and last years harvesting our which two, ago, and [Technical and chain food reduce the supply margins; to we the the plan simple on results.

ahead, we position to better will deliver product rolls our remain we performance. pumpkin is variety X-Cheese Cheese strategy and new spice Schubert's New year bakery blueberry. quartile the to Looking including believe true benefit including which fiscal introductions from retail and sweet of flavors new Sister sales top and lemon us York year planned intend will 'XX, to our throughout In achievable a in appropriate, Sticks

great dib dips shorter Our refrigerated Mars panels. offer and ingredient also new be tasting Eddie will reformulated to cleaner with lineup

anticipate dressings sauces continued agreements. license also and sold stable shelf We growth from under

the incremental to addition sales In Bantam Bagel from acquisitions.

maintain the of and benefits and focus will in through relationships while customer strengthening center. our innovation formulated leveraging In pasta, we dipping preparation the sauces, breads our foodservice frozen and expertise new the dressings our frozen on custom culinary segment, of rolls added

half ongoing Based assessment, to year anticipate year flat, planned the a expected on overall costs fiscal the by generally fiscal Six to our chain and out offset Pricing addition cost. projects costs XXXX in commodity back the team of an inflationary our commodity Sigma than current we more with Lean for other following these year cost up were which initiatives, from our in supply be will savings help front. in program tick

growth for In capacity the through our we in will coming to continue key invest outlined. Tom as long-term year, business projects also

remarks our be happy any we'd for day That your prepared and answer Jason? concludes to of the questions.

Operator

comes question Jason Please from first [Operator Rogers Instructions] Lakes Your line of Review. ahead. from go the Great

Jason Rogers

sales. just more the I to Yes. wanted talk about retail

there. gain six you If if you're didn't holding four you're and seeing in that at any least competition changes share recently out the of categories

Tom Pigott

can I for that answer Yes. you.

another flat is the flat. sort was latest and of six just six we're what's out several on we that business remain down particular And two store we commercial picked share. in in grocery and something product up a different categories down we've principally competitor doing, significant And now X.X, this wraps And our a the So, weeks call, of or walk had is of it through impact retailer years. section the three The now the in category. bread. more below that essentially the in in driving that. so big the more particular. were in was it lost it weeks moved in that from we deli the merchandised one share to the product we slightly than And and one and deli than times had we that XX.X XX over of down we're This the category three seen down again and that in ordinarily a the XX latest last four of is pretty bread

Again, single it driver largest as we've we in able well. this recover working the were this to past, to and period be that seen we're to address seems the particular in

the We marketplace innovation have range into that a of it. strengthen we will bringing think we're that

this the point only In impacting category obviously move in well. addition and its emphasizing not that us to retailer the business back their as impact and we're going we're the but is

Jason Rogers

that you the us Omni. well -- with with Bantam like forward the calendar expect help what Bagels, I the you on Omni costs as year. system Bantam side like both as look said Omni of then by if well expenses for and be some ongoing over going And as could from ERP looks much for the far you end you've just although they'll cost wonder as got as that as pretty they're

Dave Ciesinski

Bantam. hit will I the First,

up foodservice, As team to the very very now results. we're process of out, with the process we manufacturing profitable continues line a significantly set which implementing calendar year, and complete pointed end the improve satisfied We're manual. high-speed product and rapidly the margins it quite the around for will both business that the automated right grow the will The of essentially on and is in be growth. this we retail and anticipate in long-term

doing 'XX my the business a think volume, taken you've to making heard as all over roughly several periodically been probably story that. supply we things floors, pumps comments and was the folded it in been of half in factory that 'XX, we've supplying down of we pertains into it throughout our factory business, network, things; like what we've it I the shutting the the sorts during net bought As Omni, we've co-packer are been since have the of one, disruption, repairs

bakery, we're factory more factory the headwind. thing in will down it's similarly. largest supply two initiatives expect end fact this of on be year. owned around other on more on expect to -- the And we're overhead line down and the the when it if you creating you or creating shut done of in absorption automating various to is, chain these shutting bringing Again, will with we also that's that processes that temporary when that of be particular be doing the this the the much What know reverse business we're this on process our calendar we operating so

I recent $X.X mentioned headwind. million And in us, my Omni the most I of about period cost think comments

quarters digit of For expect year range on for that to of the other to and probably this million next it the dollar was thing. low side we full get million it the headwind two until remain $X in mid-single we

Jason Rogers

ERP the then, there. ongoing And expenses

Tom Pigott

in $X.X had now, period right essentially of we million we to expenses recent mentioned of So, the tied most ERP. as

we ERP out have range. to report will our one to team We I upcoming million when expect be more we've on results And overview, this fiscal for this dollar to we engaged QX. back you stood the then we've the with complete our in to year the to would low mid-single integrator to a be coming XX our package. period also for be system selected quarter spend

Jason Rogers

Okay. Thank you.

Dave Ciesinski

you. Thank

comes Your Instructions] [Operator Frank from of line question next Sidoti. the Camma from

open. is line Your

Frank Camma

Good questions. morning taking for the guys. Thanks

Dave Ciesinski

morning, Good Frank.

Frank Camma

go so about the talk to category revisit that you acquisition question how we never how unraveled? down didn't specific could if and it company. want first contingents it is, targets write to about the Angelic you means to My Can we little targets, back that you a Can obviously the get. a and missed you you bit Just your and hit that? was issue, was the talk understand wanted

Dave Ciesinski

is would the in ascribe a that's tougher One to and couple of out contributor. Sure. category perimeter would we've things. would little Sure. learned guess flat probably point I I the say it a grocery is to say acquisition case the that bit point in -- I a as of I store a also a

The other less biggest And to thing when wean the the to business. that private label to crust had as pretty the And significant our was we business our taken ourselves tied we essentially bread, resulted we have happened in on is in private acquired worked probably other efficiently. also decision label and really loaf that that of impact has to the in a piece have pounds, out private branded it's a write-down but we business begin as we made the that what's made ramp-up products. label in and business wraps factory branded run

as tend but we to rapidly be So, the not want. growing, other business parts of as the

it with numbers you tumble accounting the into just It's is we taking they where to the is get out where relatively appreciate you mark-to-markets our And square to and earn to Frank it right let on want us on have an this game short that's is, not this duration go. longer business a So, expectation fall. that just can the over. as

Frank Camma

Sure. on missed Sure for it. broke up the I XXXX? say little just a that you repeat you the capital Did get number, number I could expenditures, late.

Dave Ciesinski

XX to XXX million the In range.

Frank Camma

Okay.

So, a as it's And continued bulk actually more than had. the that. of that's what plant the build out I of

Dave Ciesinski

a give -- can We you

Tom Pigott

the property then, land continue in dressings the investment. Frank, then, growth invest of we the there another Omni Horse to Dave previously on to that coming. another got was continued also and dinner that's are foodservice is was in highlighted roll last, And as project investing leased. in three one And the the things, the We're big that's Bantam category $XX million frozen support buy XX. we've that's Cave, building that

So, big the those of spend. are the drivers

Frank Camma

Okay.

onto So, initiatives for talk going you of big a there and the little -- about about theoretically Can about just thinking organically your that I'm products? bit that in comp a if the know talk to you more in foodservice against could underway weaken what customers about how you specific it actually year the a things retail the there foodservice, that since the are that? some of economy, was more you spoke challenged, be would do the because are Could total, both little weaken, discussion. sort more that right, there, be since could bit just economy were theoretically, I

Dave Ciesinski

all to I'm it to Suffice asked. absolutely. tremendous glad they and on cylinders. seem team a that just Yes, be had year you firing And say

strong. large Our business account national is

where into selling new continue to make and and colleges the to we universities to new also into customers and have business customers add we're segment measurable started headway We branded existing and healthcare.

business. of feel the really about the disposition bullish we So,

I forward, because the to probably the out of of peg digits of the what expect comps. As we business magnitude mid I mid single that would look low, in would

case necessarily me and hundred look both of at what so trends of of at is the or term sort the few about includes our sales economy, of just in this overall ordinarily think the We traffic, juxtaposing couple is, traffic. look if probably I and you exposed. you look back segment and longer trends looking the business that against and Ordinarily, from sort data the wouldn't that this seen trends. at sales I Technomic's ring perform at better points a is has than one just will As would restaurant Frank I've this our pieces that's basis

you the be that if So, indications economy tightening recent news, look slowing may down. most are up at the and

restaurant customers, hanging data number look a you they there. most the our If of seem in from at to be recent

I So, how as like positioned. our business, far we're as

the beneficiary I perform would think to projects. also Six a and Sigma a to continue that range net fact it's strong of they've going to been of I our point

case manual look packing, You at helping business. lines taking fair of where that amount is the part our [indiscernible] end our of the there, automation we're conveying and out doing from what at labor that's we're of underway

this is business. it's So good -- very

Frank Camma

a called or And specific at, hop for last soybeans costs did Great. that? there any them one other whether in commodity comment you you particular you I'll it's and you should make is Is since because now what these, me then concerning right a out. eggs or off commodities, look on

Dave Ciesinski

really. broad Its based

which across As the hedged. range popping seem have to that is, to favorable of price if seems across to have the we're lot inflation it can over out bit us. items seen we harder that easier of be be just were increase months. the almost to of parenthetically couple XX a out and commodity a that the is, are core now a look doesn't makes go little X% we're X I've farther and It's the for looking But, What doing you little a case next things, discussions. be beans board, obviously what

Frank Camma

Okay. Great. guys. Thanks

Dave Ciesinski

Thank you, Frank.

Operator

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

Dave Ciesinski

results. call. for forward thank the QX you, the Jason, our day. with look great a later Thank fall to you in you updating We'll Have and those on

Operator

That today's concludes call. conference

disconnect. now may You

Lancaster Colony (LANC) 27 Aug 192019 Q4 Earnings call transcript