EX-99.1 2 l24345aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
     
FOR IMMEDIATE RELEASE
Wednesday, January 31, 2007
  SYMBOL: LANC
TRADED: Nasdaq
LANCASTER COLONY REPORTS SECOND QUARTER SALES AND EARNINGS
     COLUMBUS, Ohio, Jan. 31 —Lancaster Colony Corporation (Nasdaq: LANC) today reported net income for its second fiscal quarter ended December 31, 2006 totaled $17,829,000, or $.56 per diluted share, on a one percent increase in second quarter sales to $316 million versus $313 million last year. Earnings for the quarter included pretax income of approximately $0.7 million (one cent per share after taxes) associated with a distribution received under the Continued Dumping and Subsidy Offset Act (CDSOA). Net income in the second quarter a year ago was $30,230,000, or $.89 per share, including pretax CDSOA income totaling approximately $11.4 million (22 cents per share after taxes).
     For the six months ended December 31, 2006, net income totaled $31,610,000 compared to $48,276,000 earned in the corresponding period a year ago. Diluted earnings per share were $.99 compared to $1.42 for the first six months last year. Six-month net sales were $606 million compared to $598 million last year.
     John B. Gerlach, Jr., chairman and CEO of Lancaster Colony Corporation, said, “Specialty foods and candles led our sales improvement, while this year’s smaller CDSOA remittance, markedly higher nonfood material costs and significant strike-related costs at a floor mat facility contributed to our lower net income.” The prior year’s effective tax rate also benefited from greater tax-free income and from being able to deduct the portion of the company’s special dividend paid in December 2005 to the company’s employee stock ownership plan.
     Specialty Foods net sales of $193 million, up two percent over the prior year’s second quarter, were driven by the strength of both foodservice and certain frozen retail products. However, lower consumer purchases of bagged and fresh salad products appeared to result in lower sales of salad dressings and related products throughout the quarter. Segment operating income of $30.8 million declined three percent, as compared to the prior year amount, reflecting lower sales of refrigerated dips and dressings, persistent competitive market pressures on garlic bread products and a less favorable overall sales mix.
     Second quarter Glassware and Candles net sales totaled $71 million, up eight percent from the prior year second quarter as certain seasonal shipments made in this year’s second quarter occurred in the first quarter last year. Higher candle sales, lower energy costs and more efficient glassware
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PAGE 2 / LANCASTER COLONY REPORTS SECOND QUARTER SALES AND EARNINGS
operations contributed to improved segment operating income of $3.9 million, up 15 percent over the year-ago total. However, segment results remain challenged by the record high cost of paraffin wax.
     Automotive sales totaled $53 million, an eight percent decrease from prior year second quarter sales. As new vehicle production slowed, sales of aluminum truck accessories declined, but this was partially offset by new extruded vinyl floor mat programs. The segment experienced an operating loss of $5.3 million compared to the year-ago quarter’s operating income of $0.7 million, which included a $0.8 million pretax gain on the sale of idle real estate. Out-of-pocket costs associated with a labor stoppage at the Coshocton floor mat facility exceeded $2 million in the quarter. Segment profitability was also adversely affected by significantly increased raw-materials costs, especially for aluminum, and by lower sales of aluminum accessories and rubber floor mats.
     Looking forward, Mr. Gerlach stated, “Our operating results in the second half will likely benefit from higher sales, with aluminum accessories volume expected to increase well above that of the second quarter. New products remain important to all business segments, and our Specialty Foods segment is currently enjoying early acceptance of our new line of hummus by produce departments. Expanding production volume in our new salad dressing facility in Kentucky should help improve overall efficiencies. Third quarter comparative results will reflect the significant costs incurred last year by the extended idling of our Oklahoma glass manufacturing facility, which is not planned to reoccur this year. Conversely, many of our commodity costs are expected to run at or above year-ago levels. The current year’s third quarter will also see further strike-related costs in the Automotive segment, although these are expected to decline from the second quarter’s total.” As of December 31, 2006, the company remained debt free, with over $482 million in shareholders’ equity.
     Mr. Gerlach added, “We continue to review strategic alternatives for each of our nonfood operations, with current emphasis on automotive operations. Our principal financial advisors, Goldman Sachs and Co., remain actively involved in our review, but challenges currently facing the automotive market have extended our evaluation process. Should our review result in the divestiture, closure or other form of restructuring of any operations, we could incur significant charges. We will, of course, provide further clarification as any of these efforts are implemented.”
     The company’s second quarter conference call is scheduled for this morning, January 31, at 10:00 a.m. ET. You may access the call through a live webcast by using the link provided on the company’s Internet home page at www.lancastercolony.com. The webcast will be archived and available on the company’s website.
     We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). This news release contains various “forward—looking statements” within the meaning of the PSLRA and other applicable securities laws. Such statements can be identified by the use of the forward-looking words “anticipate,” “estimate,” “project,” “believe,” “intend,” “plan,” “expect,” “hope” or similar words. These statements discuss future expectations, contain projections regarding future
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PAGE 3 / LANCASTER COLONY REPORTS SECOND QUARTER SALES AND EARNINGS
developments, operations or financial conditions, or state other forward-looking information. Such statements are based upon assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements involve various important risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results may differ as a result of factors over which we have no, or limited, control including the strength of the economy, slower than anticipated sales growth, the extent of operational efficiencies achieved, the success of new product introductions, price and product competition, and increases in energy and raw-material costs. Management believes these forward-looking statements to be reasonable; however, undue reliance should not be placed on such statements that are based on current expectations. We undertake no obligation to publicly update such forward-looking statements. Specific influences relating to forward-looking statements are numerous, including the uncertainty regarding the effect or outcome of our decision to explore strategic alternatives among our nonfood operations. More detailed statements regarding significant events that could affect our financial results are included in our annual report on Form 10-K as filed with the Securities and Exchange Commission.
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PAGE 4 / LANCASTER COLONY REPORTS SECOND QUARTER SALES AND EARNINGS
LANCASTER COLONY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands except per-share amounts)
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
Net sales
   $ 316,497     $ 312,577     $ 605,532     $ 598,492  
Cost of sales
     262,750       252,623       505,453       485,297  
 
                        
Gross margin
     53,747       59,954       100,079       113,195  
Selling, general & administrative expenses
     26,335       25,842       51,296       51,876  
Restructuring and impairment charge
     26       19       45       43  
 
                        
Operating income
     27,386       34,093       48,738       61,276  
Interest income and other — net
     873       12,639       1,251       14,025  
 
                        
Income before income taxes
     28,259       46,732       49,989       75,301  
Taxes based on income
     10,430       16,502       18,379       27,025  
 
                        
Net income
   $ 17,829     $ 30,230     $ 31,610     $ 48,276  
 
                        
 
                                
Net income per common share:(a)
                                
Basic and diluted
   $ .56     $ .89     $ .99     $ 1.42  
 
                                
Cash dividends per common share
   $ .27     $ 2.26     $ .53     $ 2.51  
 
                                
Weighted average common shares outstanding:
                                
Basic
     31,735       33,838       31,827       34,029  
Diluted
     31,770       33,861       31,853       34,074  

(a)   Based on the weighted average number of shares outstanding during each period.

LANCASTER COLONY CORPORATION
BUSINESS SEGMENT INFORMATION (Unaudited)
(In thousands)
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
NET SALES
                                
Specialty Foods
   $ 192,594     $ 189,505     $ 364,881     $ 359,039  
Glassware and Candles
     70,581       65,269       125,087       125,544  
Automotive
     53,322       57,803       115,564       113,909  
 
                        
 
   $ 316,497     $ 312,577     $ 605,532     $ 598,492  
 
                        
OPERATING INCOME
                                
Specialty Foods
   $ 30,769     $ 31,574     $ 54,951     $ 57,418  
Glassware and Candles
     3,923       3,417       3,122       5,620  
Automotive
     (5,312 )     699       (5,843 )     1,833  
Corporate expenses
     (1,994 )     (1,597 )     (3,492 )     (3,595 )
 
                        
 
   $ 27,386     $ 34,093     $ 48,738     $ 61,276  
 
                        
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PAGE 5 / LANCASTER COLONY REPORTS SECOND QUARTER SALES AND EARNINGS
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
                 
    December 31,     June 30,  
    2006     2006  
ASSETS
                
Current assets:
                
Cash, cash equivalents and short-term investments
   $ 10,801     $ 41,815  
Receivables — net of allowance for doubtful accounts
     119,506       108,987  
Inventory
     151,147       161,949  
Deferred income taxes and other current assets
     28,696       26,032  
 
            
Total current assets
     310,150       338,783  
Net property, plant and equipment
     195,612       187,272  
Other assets
     101,839       101,966  
 
            
Total assets
   $ 607,601     $ 628,021  
 
            
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 44,147     $ 47,684  
Accrued liabilities
     51,793       55,816  
 
            
Total current liabilities
     95,940       103,500  
Other noncurrent liabilities and deferred income taxes
     28,748       30,100  
Shareholders’ equity
     482,913       494,421  
 
            
Total liabilities and shareholders’ equity
   $ 607,601     $ 628,021  
 
            
# # # #
     
FOR FURTHER INFORMATION:
  John B. Gerlach, Jr., Chairman and CEO, or
John L. Boylan, Vice President, Treasurer and CFO
Lancaster Colony Corporation
Phone: 614/224-7141
—or—
Investor Relations Consultants, Inc.
Phone: 727/781-5577 or E-mail: lanc@mindspring.com