LANC - Earnings call 3 2023 | Lancaster Colony Corporation

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Operator

Good morning. My name is Carmen, 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 2023 Third Quarter Conference Call. Conducting today's call will be Dave Ciesinski, President and CEO; and Tom Pigott, CFO. [Operator Instructions].

the Corporate here for Finance Corporation. begin Vice Dale Lancaster to of President and now conference is call, Ganobsik, Colony And Investor Relations

Dale Ganobsik

morning, Call. us for Fiscal Good XXXX thank Lancaster Year Conference for Colony's joining Quarter Third and everyone, today you

morning differ to of to forward-looking based subsequent of statements, this results cause number are to XXXX. filings the the These subject which obligation SEC. Securities Private of include of uncertainties a provisions events. statements is harbor the and discussion with actual undertakes no uncertainties may company's materially, that risks update company detailed Litigation discussion in are and these upon to Our the these safe the contained statements Reform could risks A and Act subject

replay note this lancastercolony.com website, this the Also be at available archived our call audio of company's that and afternoon. later will

For quarter. comments will the be today's respond the financial our our current and to with of Ciesinski, of some overview will update highlights results. and any outlook. and strategy your we'll of Pigott, questions. our conclusion begin prepared will the Dave Tom happy then President CEO, call, remarks, provide an Dave share for regarding to our the business At then CFO,

morning. we over this again, President Once appreciate the Dave your Ciesinski. Dave? I'll call and turn now participation to CEO, Lancaster Colony's

David Ciesinski

sales to both morning, to we good a record report which profits. here our for $XXX gross pleasure we March quarter, It's while were million. and In everyone. third XX.X% net review improved year consolidated higher and our pleased profit ended million, as Dale, quarter you XX.X% third Thanks, Consolidated fiscal to XXXX. $XX.X today sales increased fiscal be with to XX, results

million. year. reached $XX.X $XX.X income year impairment operating Prior a last of an income million charge restructuring loss of million and included Operating $X.X operating to compared

shipped offset for the actions impact The net up of XX%, success Retail growth by million, to continued garlic products. sales our volume inflation the volume program growth licensing frozen X%. driven growth our York QX Bakery New $XXX of and in driven by favorable The segment was pounds reported bread double-digit of and strong pricing of measured

Chick-fil-A Wild contributed dressings, brands. Garden Wings to our data sauces, notable volume IRI In Olive showed from brands Arby’s York fiscal for Sister third sauces, share Schubert licensing, marquee for sauces and growth. and and Bakery Buffalo gains all sales gains category-leading New retail quarter our

frozen garlic grew share New basis less pricing segment, York leading increased to $XXX volume Bakery's frozen net XX.X%. leading X%. category driven Sister increased volume by In XXX points customers points basis Schubert's In the sales of of dinner the XXX bread category Foodservice XX.X%. several higher roll And total, demand share products. over to Foodservice XX% our national segment for for our actions, million, account Foodservice branded grew gains and than to

of Excluding was discontinued sales lines some past over less up that the X%. profitable Foodservice volume during were year, the product

actions, is PNOC materials through packaging. last pricing pricing recovering of were we the favorable benefit levels trend During some or of PNOC QX continued the experience of in for negative a versus year. This of high which this prior QX, began and of to continuation was experienced year That inflation net commodities said, the raw we that the in of year. our we

savings productivity from improvement in cost gains. another to of benefited attributed also quarter We sequential

performance. we engineering chain improve focus ahead, will maintain our financial revenue value on and quarters the management In to supply our productivity,

improved and performance. Tom, it over contributions I'd like thanks and the to sincere turn to to financial ongoing team extend to operational our their for my I entire Colony commitment Before Lancaster

over commentary our results. on his Tom? I'll for third CFO, to quarter now Pigott, turn call Tom the our

Thomas K. Pigott

driven growth quarter the for bottom quarter. versus supply line that offset year pricing chain prior by performance Thanks, Dave. results growth strong costs, the the and Overall, continued volume actions reflected improved inflationary and top

to increased $XXX.X growth volume percentage sales remaining points by increase pricing percentage by driven a points was net XX.X% mix. and quarter revenue, million. were Third with favorable volume, by This driven in the XX.X XX.X% sales decomposing driven X.X pricing the by more and

Consolidated million increased and favorable The chain $XX.X gross improved by supply increase PNOC, volume. profit $XX.X to or gross in profit XX.X% performance million. reflected higher

of lagged If as in the QX had you in 'XX, PNOC we costs. rapid we recall, run-up negative fiscal

We recover continue to those losses.

offset quarter, this XX% increase shortfall. approximately was prior inflation commodity actions the and this our our While pricing year

chain supply supply As a in high higher the improved experienced in costs. disruption to we quarter, year it performance, resulting relates level chain prior of the

company improved, This contributed profit the performance. gross improved the quarter, to execution that and generated savings cost

in Finally, spending both increasing our and charges is resulting Selling, general second from the XX.X% and product its the to reflects and $XX.X stages. position impact despite higher costs. segments compensation, volume into brokerage support discontinuations. of supply consumer investments reported Expenditures Ascent, million. increased improved. expenses The to as higher the settlement to product included business investment support of the Project Consumer business for initiative, later as incentive lawsuits. administrative were the down drive progressed of increase increased growth The volume of or project growth growth the our growth has ERP half the spending the the

$XX.X impairment the year operating $XX.X they consideration. million netted million. restructuring to quarter. increased million a project expense. for the year noncash the in $XX.X changes we the income quarter charges contingent to Consolidated quarter, totaled in and million $XX million prior Together, benefit recorded year to related in versus In Costs a current $X.X prior

of costs. the offset gross Excluding partially higher these items, operating profit due SG&A strong income by the business, increased growth to

to prior tax XX%. rate quarter. for quarter the the be for fourth versus XX.X% was XX.X% We in tax quarter year estimate rate the our Our

in to noncash growth reduction Project that year The $X.XX. Third underlying and the contributed EPS quarter. quarter the the per in totaled diluted earnings mentioned, primarily which expenses the versus $X.XX prior prior driven Ascent $X.XX, $X.XX the was year improvement to of charges increased share X The I by the performance in business. increase the

regard for payments capital additions third quarter property totaled expenditures, million. in the $XX.X With to

forecast fiscal Horse year expenditures the For approximately we million. project. Cave million total expansion $XXX the includes This $XX approximately forecasting of for 'XX, are capital completion of

In we in addition investing our to business, funds shareholders. also to returned

dividend share amount. a prior $X.XX paid March increase cash represented from per quarterly the Our of X% on year's XX,

enduring Our of stands years. annual dividend increases streak at XX

Our financial position are of with $XX.X remains million the debt-free cash sheet. strong as balance we on

areas, wrap up back his turn strong So I'll several closing our over in reflected you. results remarks. it very to growth. improved Dave in to now Thank my third quarter commentary, performance profit resulting for

David Ciesinski

Thanks, Tom.

our operating Lancaster pillars leverage the to Colony sheet continue we combined our strategy plan margins; chain strength support -- our of our growth; to: three, simple cost balance our one, our in grow growth ahead, focused our two, business and with supply As the core of M&A accelerate of expand strategic X to will and and team, look our reduce licensing. and core simplify to

fourth from that fiscal sales growth fiscal to introduced continued we year. anticipate And restaurant customers. in new incremental this our expect our In of flavors we program, and Foodservice, our quarter, national retail sizes licensing from we benefit products, chain from several growth volume

orders our incremental benefited ERP X. advanced of last sales that estimated consolidated noting million net worth in an quarter net It's will July customer from year's date sales X go-live ahead compare to that to for attributed $XX fourth our the wave

increased actions to to expect our the financial and cost we a results, remain headwind Cost our initiatives savings offset inflation pricing cost. will but

like an the of Ascent. I'd initiative, Finally, phase implementation you our provide to Project with on ERP update

past As we completed October, in previously, wave X. completed the this shared wave successfully of X July, we we And implementation.

in impacted ERP report and completed cutover Horse wave the the we issues. I'm system dressing quarter, successfully our implementation expected, some adding incur as did the X happy that third cost system. but unfavorably planned, were Kentucky During Cave, fiscal to largest our has by as team as the production implementation, addressed we sauce to new production successfully facility The of went process. and those incremental service

We complete to months the first waves during the our coming of expect with fiscal phase to quarter. Project Ascent implementation in conclude scheduled the final

my to This might prepared concludes we'd today, all efforts strategic to my sincere for our thanks on like remarks important initiative. be to for you questions their any extend I'd this ongoing answer of have. happy teammates and

Operator

Benchmark Todd The comes Instructions] line [Operator with the of And from it Company. Brooks

Todd Brooks

I you, versus we a talk A the we some SG&A prior G&A? And the legal that then charges expectations love One, in in about may. half level outsized to little if couple was customer that our spending maybe that maybe questions of can the spend bit. get of dive of were back into total? the expected I'd or higher too either if year, that modeling was color what for going conservative were just if the in of forward,

Thomas K. Pigott

Todd. Okay.

through that. you So I'll take

And expectations. million. this quarter, So the of was as the increase had the last where compensation really, a we performance year-over-year And it's $X the case is in year, the below incentive what we overall company's exceeding. financial business was year, --

So million half more that a is as the item the is a of that first third kind of quarter. transitory for as catch-up well of the $X year

were and businesses $X to related settlements legal closed was The that million.

from invest million is business, up the and the really that $X last in a touch up amortization in spending I'll you're talking million, really that's live The on to going was we're transitory nature. So costs into costs about -- the on the when SAP are get you more of the is that $X then And dollars. things the driver was the brokerage bucket, the million software. core new Then licensing couple next really the grow. and consumer and

I on. those the items So key want hit are to

to support the outlook for invest In of the we're terms to going continue business. grow to to QX,

we'll consumer last be higher their So continue drive And year we we position growth. sequentially improved, supply volume continue to to the want do to spend has and as expect spend Ascent. than on to

bonus particularly Some repeating. some transitory costs, the of the those be won't and legal of

the So the in we fourth to decline sequentially, quarter. overall expect do spend

Todd Brooks

everybody. queue. helpful. really trying That's I'll final And just back question, this Perfect. to jump and set is in my level And then

of shift. thinking the was on an as timing pulled the and estimate that pull teased forward about Dave, what retail quarter about up quarter, you into that from type Is So into about Easter we you in March forward. pull a that was release also impact in talked the do the based revenue we're Easter against you quarter? forward the we're the potential timing? But there March that this $XX just out some Maybe think million segment

David Ciesinski

Todd, maybe start First, QX outlook for about we'll just I'll then the talk and about QX. talking

was contributor. shipments the but bigger launching. The in really items modest was it a we're Easter driver was QX, more contributor, that swing volume new on For a behind

of some gone of a out, the range particular, the of items example, those size for larger of in sauce So Chick-fil-A, that sort and have others.

we've had Wild just on to been strength seen been incremental the the of taken that we've of has online the continue as viral some And able as driver volume bring business We've other proposition Buffalo place. the capacity, to that's marketing Wings run.

$XX we to forward others it's QX, the continue that and Foodservice. did think that that forward pull of retail, for in track. of $XX last in We $XX I important year. in million was have As million million look you was for to

the for we volume Importantly, continue growth volume to business, a overall modest think consolidated be in QX. as might to for we about the what like pathway outlook see business the

in much growth and little basis mid-single-digit as screw an then look probably volume to as of you sight line you see the If business, that at to possibly tighter retail bit on business. there mid- we on a organic

to we good continue feel about it. So

Operator

Wolf from of line Andrew CL comes it King. the with And

Andrew Paul Wolf

a relations, of bit. kind Ask of an of on question trade open-ended kind state the

Just most to horrible elasticities, bit. pricing having of or but all It's the not volumes. negative seems trade this sectors certainly supermarket has up like it the a retailers, the chains caught the

private losing are brands share Some label. to

Some of yours were.

of And ramped-up overall state another saying, play with into price increases retailer Now they're the second, asking of what the not. play "Hey, state for round need them XYZ. is is with to we What of increases promotions?

about your goes as trade. but of goes customer net Are more G&A, that sales through talked which well? the the you into which they one, side, see for retail of I more asking

David Ciesinski

to conversations unfortunate characterize thing want last and lot had would about counter -- The highest last just is, years pricing them is to I'll with that with we those I'll as conversations growth. of go the talking those conversations very continuing about of being we've been Andrew, at The able talk customers. constructive. of by the things be new to level. launches We've always the talk we're drive of by about about pricing. And So do item to retail in inflation them outsized to had, reality because in and maybe I couple a able we've about rate doing other to start start our

think in I because of not about very I constructive our our talking about retailers, in pricing, we're just as but -- would a So them relationship think there about peers, category the with I I you lot ideas. can the all sort necessarily put volumetric for growth but that's category a case stand I tell we know of growth where don't and if that's today. of our disposition

far pricing continue tough As some conversations, we as had and is half through to the have concerned, year. price of the first we

any talked. since pricing that we've haven't taken We last the time

to remains say, positive. retail months. to we in, grid the back fully marketplace PNOC And more Our whole the a they which to last and pricing, be than lot expect to have the go around business into let's those conversations conversations need tough we were XX

the been tell not you our probably in have we are getting on categories money label more expect intense commodity into that leverage of I expect to would So a bring to trade to most developed more to trade see feels fall rate pressure have back And in is we where would try increase retailer what areas to category. front. lots date, aggressive now those is your the what conversations more have private I our or like they is, that Where on items. the and seen the other question or can

it maybe advertising in And some to of growth to knock we're current partnering talk just equity foremost, to drive always because talk our retailers to growth our than about the that's the growth with working the, wood really, tends we're even the call marketing of below-the-line circumstances. areas. really category and again, spending be And on is of with drive to lever more that areas spend focused is the And drive want about, not I'll and what hardest. baskets. it, do first can in where let's retailers their basket we them That necessarily the here, spending

to So how I out side figure how would say retail business, innovate continue the to them their be to we're grow relationships the to we market collaborative. so we end, to end working business, very with their grow on

side, the with around Foodservice commodities. apparent open over very accounts, operators, have positions shared we've think with years, in work Foodservice that the On we spend. and commodity them you our a I relationship Andrew, on particularly to with take We core national these

want and they a times often exactly know them. we situation want to with our and tell to on They what take So far everything position, go is again, work commodities, us they when how they else.

Andrew Paul Wolf

on Quick Appreciate that. follow-up just the Foodservice side.

I either You've volume been margin. about or items cycle? you that think X% kind contracts And When of that low it a rationalizing does some said was were impact.

David Ciesinski

cycling end really the of that. through We're

simplify are mean will I tremendous important -- we're You'll Foodservice of that that's margins The helping team in has their credit leverage. see improve and rationalizing a have that in beyond decreases us items SKUs, create better essentially rationalizing mean impact bit of lot of then operating their a to it They ability course. done in its QX an job little double-digit really a strong business that a customers space. run deserve overall. talking been and to it's I to contributor

Operator

our One Consumer question, next moment please. Rattigan Edge. Connor for with

Connor Rattigan

Yes.

a So top sort line strong could the I better. was guys. us quarter, little obviously, a And congrats here just you this bit drivers help wondering, of really understand maybe

demand how locations? maybe X% just much pre-launch Arby's volume increased guys a out consumption at portfolio you're incremental on license is Foodservice just was that called also retail or you due growth to quarter. side, was just of the existing crucial, I'm that And the wondering obviously, higher comping but So that placements that given

David Ciesinski

Sure.

a contribution that. to little XX% the So Arby's less than was

to and how we about is proposition performing. continue contributor, excited be it a So that was notable

Wings saw contributor New toast strong to Chick-fil-A Buffalo case, also as own was And that. contributor We strong well. brand, our as a Wild a to was York this a strong was contributor that well. Texas in

out how selling of incremental chain figure nice that. a has to to done a out job our sell and really wring done marketing continuing supply The team nice to job continuing organization capacity, and has

X looking line. brand a at as and whether X-year between XX% or nice that almost looking up continues a stack, you're growth, where even business the story behind volume it And also we're the really overall, think you're noted on that's sales year seeing I I at here. be to XX% a

Connor Rattigan

And the No, that's on great. cost Really helpful also side then guys. as well.

around you I expansion -- impact [indiscernible] I So in XQ? inflation at commentary the around while. expecting cost of you're cover savings been can also to for sort know you've inflation year-over-year a Unless guys it, trending inflation XQ respect XX% margin And I here. figure pricing to Can missed inflation you we guess, despite a with have the do share? and

Thomas K. Pigott

Yes.

then The dilution So at we prices the looking And a from inflationary the higher year-over-year. the of look engineering, begin from basis initiatives, value question. -- mix you bit look moderate Dave in-sourcing. we at When contribution we've the the better it about savings more sales at XX%. improved talked the QX cost higher thanks XXX a a mentioned commodities, offsets, QX. get does in for impact impact discontinuations. point as to But was natural about and we're and

will that of that us QX. get natural we mitigate in All dilution help

kind a quarter. fourth percentage prior in at So gross the year we're consistent the versus margin looking of

David Ciesinski

would but specific beyond outlook. then given other We're oil some moderate. on offset seeing I that categories particularly We're categories recently, run, other more what But is they're are as you haven't eggs, moderating. expect, that, it And sweeteners. to particularly seeing like share is, moderate, guidance the I you the we by continuing of being with think might

our with have QX we that with more share to out results. we'll on So as come you

Connor Rattigan

kind rollout to X that here. looks it the of Perfect. just more initial following we And X track similar like really data Chick-fil-A. track that to see, in Okay. squeeze I quick Arby's going just

happy So roughly made ahead. I guess it you is just the with or date? running expectations maybe rollout in how line are to slightly guys your just with And

David Ciesinski

with it's them our would cut for consumers And with and in for every shelf the you I place one line time, takes the our say, very, the arc brand of Connor, items with necessarily get these, the across Arby's right to it. you with mean, awareness that true can we've that, to a trial become ordinarily retail in time number with out doesn't come the is for facings And to very it in when What turn. to it's like to true this say learned on I of just is have is see proposition. -- wherever Wild of the the cut of it's think I that it Wings. longer because retailers expectations. What they shelf, initially get partners has aware Buffalo retail restaurant, let's but

it's migrate turn, mix really what change eye. usually, change the closer maybe be for going Then top make So of the They as happens item that the is don't a to bottom of X shelf planogram. the to of they'll a to starts shelf. the or phasing, then dramatic the the And you'll of see bit little items. the the bull's from bottom top it to

the have phasing, that they'll go make X or dial You in and of sometimes SKUs those they X mix to could amount. right from the X, to sure

on to Olive was we're same in be true Buffalo that with Wild it Wings. Chick-fil-A, Garden, with Arby's. out thing And seems It playing seeing true

with to willing much thrilled we with running line this very proposition. we're what partner was on and that us it's Arby's thought, So in just

that Our retail. job executing loving it in team on and of great has a just done business

Operator

from King. of a the We follow-up CL Instructions] have line [Operator Wolf Andrew from

Andrew Paul Wolf

a potential one from various system from of addressed would third seen link I consultants since the A strategic through. realizing target would part ERP all with of M&A you've of kinds. and it getting getting different It beginning processes And be running kind outside lot ERP at you, all with decent-sized of to things contingencies handled question. and you've implementation bit -- good the least, big It's into a a synergies up is you've phase of that, want this yourself. all to and the the to behind of a to go working wave phases doing a the seems

has Where say the are how do can you target with integration you confidence at take you to we would need implementation, do guys enough with the about gone. as we based and ERP to on have such that all ERP think it, this implementation

David Ciesinski

Sure.

new wave really flagship being out, through our warehouses pointed system. financial Andrew, rolling gone wave sequentially, the Horse what then and our so been part comprised in wave X. with plants all better taken we in factory X, in we've the backbone GL, that's of we've script, wave X, As our and the we've Cave of And X, on

we're of current going online X the Now our that's be is warehouses. that of factories in driving this X wave dressing bringing what we have going to out And and still be dressing that's really our last there of consisting quarter. to

you're art have taking So working, in on you business. hybrid place the service none you make are just the to as going way new we're this to of -- is care sure to can that so that people be changing X. want enough you people It's wave fundamentally perform in

just We're those exist the far down and will our stabilization, focusing get on we in our in So warehouses our really to changing be more expect and bedding will plants training. and And expect up and a cleaning calling we work may between and they're together utilization the effective in point people factories this we doing August, fundamentally that that broken X. efficient as in remnants to we're in glass complete. our have still people after do fully talking when one, our work. system, of time how helping the way our release around call it, What really we're about period focus is wave QX, up that really, you with at wrapped we now

creates a very, about for that And are we talk window us an that's of item Now all M&A. to also very excited that about.

us of as started than the companies had acquired a that really you're to If company. an been journey, we this you out SAP has we back rather integrated more confederation that. journey go enabled started talking really to about, where do of strategic

our going the So integrate look to network from at greater bigger give an at efficiencies, do that. customers scale precisely want ability allows it optionality that to to small tightly done we that clean internationally platform. look acquisitions or perspective, effectively that very it's gives It Foodservice of but grow and into to us us us ability some on others our them have to also and far follow our also it and could should more do than old the businesses

So from a timing be in perspective, between expect to -- what and be come acquisitions described like stabilization allows I about do we're really wave QX, going period. our X we when set. our entering along, said, period at talking X.X, Lancaster We're that our behind between that together release, now to August these into into to about point, strategic it Colony all the think consideration us where us And we've us.

supply externally through last of a about. because disruptions. change we years, intense went look if COVID it's the period and And we're you at period Really X an super chain imposed of excited

And business relearn colonizing tail to end the period that, move to mean thing transformation. of forklift somebody Because complicated would back operator, the I'm Towards this work. be kitchens, an project are I through go in business that's the I our that for through working they're project say self-imposed internal -- Mars. more a and tell forced change of would be Mars. to mean, Because of the team could way the to operators, there for I for -- the only figure SAP you talking a got even lived anybody we've because the do they you, I gone they can ERP

to imposed create us and winding external then us and and to strong. sheet, getting grow go this us what and chapter of to team we're feel our the a strength going can for we on down. about excites people for leverage just that's it's is going I think book we for how And internally better out which the another and our really like is -- we allow So change focus customers. and to in both balance our are where opportunities chance And figure

an it's period looking certainly move forward towards. So that we're exciting to

Andrew Paul Wolf

fiscal and a the that on into training follow-up entering be 'XX. And utilization you'll part

sense all utilization, you of process, understanding after is, of a experience of if well. what it just the -- described, goes my potentially it's benefits Just exponential cumulative, the the kind crawl-walk-run really of -- all training and or ERPs then my sort and

feel would implement you need get some well? the to about in good target do legs but learn new implementation, payoff acquired just you about behind to before feel can you feel you you because you payoff a and Do that have you getting that bring you a right, Or expected? do want as feel good all also and the simultaneously business

David Ciesinski

doubled do of the way We've brings of implementation. the footage we a the it, call the And last, amount about with branch our has Andrew, middle on the the year In right? much -- the I size But for had we're we've How really in that factory. guess I that lot branch. flagship weight better whole well, thing thinking would itself organization. a the done part other of -- the let's weight weight it way and square the have had total here this of of Columbus, on it is really reflection in is chunk, branch, the the a we've fair the ERP of in of complexity.

branch the the seeing from weight the we're start expansion of diminish. to So

weight diminish. will the branch from The of ERP

sufficient the feel we system look at we'd But before could I have a we for look to operators our have food on feel we service retail on there's all like say able go service other sure weight make and could to customers, at have So things acquisition and have entertain and business the I take that the us an branch the and strategic to we we available think as going to so perfected wouldn't for acquisition. far an like to that amount be seamlessly. of

Operator

I'm his will to the turn comments. further questions. call concluding Mr. Ciesinski Instructions] back [Operator showing any not for I

David Ciesinski

We look morning. a you, you day. forward Have our you, in quarter we're and for fourth results Thank this thank great to together back August. participation operator, sharing with everyone, when your

Operator

you Thank now you participating, may for again and disconnect.

Lancaster Colony (LANC) 4 May 232023 Q3 Earnings call transcript