EX-99.1 2 l32995aexv99w1.htm EX-99.1 EX-99.1
Exhibit 99.1
         
FOR IMMEDIATE RELEASE
  SYMBOL:   LANC
Thursday, August 21, 2008
  TRADED:   Nasdaq
LANCASTER COLONY REPORTS FISCAL YEAR, FOURTH QUARTER RESULTS
     COLUMBUS, Ohio, Aug. 21 — Lancaster Colony Corporation (Nasdaq: LANC) today reported results for the fiscal year ended June 30, 2008, including these highlights:
•   Net sales increased four percent to $981 million versus $946 million last year. All prior-period sales and results of automotive operations have been reclassified to discontinued operations due to their divestiture.
 
•   Income from continuing operations was $48,439,000, compared to $64,279,000 earned in the preceding fiscal year. Fiscal 2008 results included a $2.5 million pretax distribution (five cents per share after taxes) received under the Continued Dumping and Subsidy Offset Act (CDSOA) and pretax income of approximately $1.7 million (four cents per share after taxes) from a fourth-quarter adjustment of self-insured general liability insurance to reflect favorable claims development for prior years. In fiscal 2007, the pretax CDSOA distribution was $0.7 million (one cent per share after taxes). The latest year’s results also included a pretax loss on the November 2007 sale of consumer and floral glass operations totaling $6.4 million (14 cents per share after taxes) and a pretax noncash pension settlement charge of $3.0 million (seven cents per share after taxes) recorded in corporate expenses. The prior year’s results from continuing operations included pretax restructuring and impairment charges of approximately $3.5 million (seven cents per share after taxes), including $1.4 million recorded in cost of sales for the write-down of inventories. Diluted earnings per share from continuing operations were $1.64 compared to $2.03 a year ago.
 
•   Net income totaled $37.6 million, or $1.28 per diluted share, after a loss from discontinued operations of $10.8 million, or $.37 per diluted share, which included a net loss of $13.5 million on the sale of certain automotive operations. In the prior year, net income totaled $45.7 million, or $1.45 per diluted share, after a loss from discontinued operations of $18.6 million, or $.59 per diluted share, which included a net loss of $15.1 million on the sale of other automotive operations.
 
•   The cash dividend was increased for the 45th consecutive year, and 2.3 million shares were repurchased at a cost of $89.3 million.
 
•   The company’s balance sheet remains strong with year-end debt totaling $55 million, or approximately 13 percent of total capitalization. The current capital structure provides flexibility to support growth of shareholder value through internal reinvestment, business acquisitions, share repurchases and dividends.
Fourth Quarter Results
     Highlights of the fourth quarter ended June 30, 2008 included the following:
•   Net sales increased four percent to $237 million versus $227 million in the fourth quarter last year.
 
•   Specialty Foods sales were up 14 percent to a record $211.3 million, reflecting increases in both retail and foodservice sales. Higher pricing, stronger foodservice volumes and the June 2007
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PAGE 2 / LANCASTER COLONY REPORTS FISCAL YEAR, FOURTH QUARTER RESULTS
    acquisition of Marshall Biscuit, generated most of this growth. Operating income declined to $22.5 million compared to $24.5 million a year ago primarily due to substantially higher raw-material costs.
 
•   Glassware and Candles sales declined 39 percent to $25.4 million primarily due to the disposition of consumer and floral glass businesses. Candle sales decreased only slightly during the seasonally weak fourth quarter. The operating loss was $3.5 million compared to operating income of $1.6 million in the prior year fourth quarter. This decline in operating income was principally due to the divesting of glass operations, lower production levels and higher wax prices adversely affecting candle costs and approximately $1.1 million (two cents per share after taxes) of pretax restructuring costs for idled glass operations. The prior year results reflect a pretax bad debt recovery of approximately $1.0 million, which was more than offset by a pretax restructuring charge of approximately $1.1 million associated with glass operations.
 
•   Income from continuing operations totaled $10,516,000 and included pretax income pertaining to self-insured reserves for general liability insurance of approximately $1.7 million (four cents per share after taxes) reflecting more favorable claims experience than originally projected for prior years. Most of this income was allocated to the results of the Specialty Foods segment. The 2007 fourth quarter income from continuing operations was $15,619,000. Diluted earnings per share from continuing operations were 37 cents compared to 50 cents a year ago.
 
•   Net loss for the quarter totaled $2.6 million, or $.09 per share, after a loss from discontinued operations of $13.1 million, or $.46 per share, which included a $13.3 million loss on the sale of automotive operations. In the fourth quarter a year ago, net income totaled $575,000, or two cents per share, after a loss from discontinued operations of $15.0 million, or $.48 per share, which included a $15.9 million loss on the sale of automotive operations.
     Chairman and CEO John B. Gerlach, Jr. said, “While mix and pricing actions allowed our specialty food operating margin to improve over the prior quarter level, food operations remained greatly challenged by markedly higher commodity costs. Our review of strategic alternatives for nonfood operations continued as we divested our last automotive operation. Our only remaining significant nonfood business is candles, and we do not expect further progress on our strategic evaluation of these operations under current market conditions. However, we will continue to review our options and may revisit our efforts as conditions improve.”
Fiscal 2008 Commentary
     Mr. Gerlach characterized fiscal 2008 as reflecting substantial progress in refining the company’s strategic focus. He cited a number of specific key investments and accomplishments during the past fiscal year:
•   Increased Specialty Foods sales;
 
•   The successful ramp-up of a new frozen bread manufacturing facility available to support the growing Sister Schubert’s brand;
 
•   Efficient integration of the Marshall Biscuit operations acquired in June 2007;
 
•   Divestiture of the company’s consumer and floral glass operations;
 
•   Divestiture of the company’s final and largest automotive operation;
 
•   Consummation of a new, five-year revolving credit facility; and
 
•   Strengthening the company’s corporate governance standard through the appointment of a lead director and the addition of a new independent director who is an experienced former food industry executive.
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PAGE 3 / LANCASTER COLONY REPORTS FISCAL YEAR, FOURTH QUARTER RESULTS
     Mr. Gerlach said, “With the sale of our aluminum truck accessory operations in June, our two-year strategic review resulted in the divestiture or closure of several nonfood operations that had combined net sales in excess of $300 million as recently as fiscal 2006. We feel we have now clearly defined our future focus on the food sector. Despite having improved our future opportunities through several new retail product introductions, implementing operational improvements and expanding our foodservice customer offerings, we faced food commodity and paraffin wax costs reaching unprecedented highs during fiscal 2008. The comparative impact of these costs is estimated at roughly $70 million, about half of which we recovered through increased product pricing.”
Fiscal 2009 Commentary
     Mr. Gerlach continued, “We recognize that aggressive action is necessary to mitigate much higher year-over-year ingredient costs as we enter fiscal 2009. Our food group is in the process of pushing forward on a number of cost-saving initiatives relating to ingredient usage. We recently closed our Atlanta dressing facility to take advantage of lower-cost capacity available at our other locations. Additional pricing actions are currently being implemented, and we continue our intensive product development efforts. We are also implementing higher candle pricing as we confront significantly higher wax costs and the adverse effect of lower operating levels. We look forward to addressing our challenges in the framework of a business structure that is focused on taking advantage of our strong market positions and highly recognizable brands.”
Conference Call on the Web
     The company’s fourth quarter conference call is scheduled for this morning, August 21, 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. Replays of the webcast will be made available on the company website.
About the Company
     Lancaster Colony Corporation is primarily a manufacturer and marketer of specialty foods for the retail and foodservice markets. The manufacturing and marketing of nonfood products is predominantly comprised of candles for consumer retail markets.
Forward-Looking Statements
     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 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. Management believes these forward-looking statements to be reasonable; however, you should not place undue reliance on such statements that are based on current expectations. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update such forward-looking statements. More detailed statements regarding significant events that could affect our financial results are included in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission.
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PAGE 4 / LANCASTER COLONY REPORTS FISCAL YEAR, FOURTH QUARTER RESULTS
     
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
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PAGE 5 / LANCASTER COLONY REPORTS FISCAL YEAR, FOURTH QUARTER RESULTS
LANCASTER COLONY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (b)
(In thousands except per-share amounts)
                                 
    Three Months Ended     Fiscal Year Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Net sales
   $ 236,684     $ 227,392     $ 980,915     $ 945,810  
Cost of sales
     199,459       183,026       823,574       764,070  
 
                        
Gross margin
     37,225       44,366       157,341       181,740  
Selling, general & administrative expenses
     19,095       18,708       80,751       79,704  
Restructuring and impairment charge
     1,071       1,122       1,253       2,126  
 
                        
Operating income
     17,059       24,536       75,337       99,910  
Interest expense
     (531 )     (137 )     (3,076 )     (150 )
Interest income and other — net
     180       113       3,407       1,500  
 
                        
Income from continuing operations before income taxes
     16,708       24,512       75,668       101,260  
Taxes based on income
     6,192       8,893       27,229       36,981  
 
                        
Income from continuing operations
     10,516       15,619       48,439       64,279  
Income (loss) from discontinued operations
     203       815       2,633       (3,475 )
Loss on sale of discontinued operations
     (13,293 )     (15,859 )     (13,452 )     (15,120 )
 
                        
Total discontinued operations, net of tax
     (13,090 )     (15,044 )     (10,819 )     (18,595 )
 
                        
Net (loss) income
   $ (2,574 )   $ 575     $ 37,620     $ 45,684  
 
                        
 
                                
Net income (loss) per common share:(a)
                                
 
                                
Continuing operations — basic
   $ .37     $ .50     $ 1.64     $ 2.04  
 
                                
Continuing operations — diluted
   $ .37     $ .50     $ 1.64     $ 2.03  
 
                                
Discontinued operations — basic and diluted
   $ (.46 )   $ (.48 )   $ (.37 )   $ (.59 )
 
                                
Net (loss) income — basic and diluted
   $ (.09 )   $ .02     $ 1.28     $ 1.45  
 
                                
Cash dividends per common share
   $ .28     $ .27     $ 1.11     $ 1.07  
 
                                
Weighted average common shares outstanding:
                                
Basic
     28,596       31,120       29,494       31,576  
Diluted
     28,598       31,147       29,499       31,603  
(a)   Based on the weighted average number of shares outstanding during each period.
 
(b)   Certain automotive operations sold in the years ended June 30, 2008 and 2007 have been reflected as discontinued operations in all periods presented.
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PAGE 6 / LANCASTER COLONY REPORTS FISCAL YEAR, FOURTH QUARTER RESULTS
LANCASTER COLONY CORPORATION
BUSINESS SEGMENT INFORMATION (b)
(In thousands)
                                 
    Three Months Ended     Fiscal Year Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
NET SALES
                                
Specialty Foods
   $ 211,319     $ 185,564     $ 808,507     $ 728,657  
Glassware and Candles
     25,365       41,828       172,408       217,153  
 
                        
 
   $ 236,684     $ 227,392     $ 980,915     $ 945,810  
 
                        
OPERATING INCOME
                                
Specialty Foods
   $ 22,531     $ 24,521     $ 88,975     $ 101,518  
Glassware and Candles
     (3,482 )     1,603       (1,887 )     5,712  
Corporate expenses
     (1,990 )     (1,588 )     (11,751 )     (7,320 )
 
                        
 
   $ 17,059     $ 24,536     $ 75,337     $ 99,910  
 
                        
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (b)
(In thousands)
                 
    June 30,     June 30,  
    2008     2007  
ASSETS
                
Current assets:
                
Cash and equivalents
   $ 19,417     $ 8,316  
Receivables — net of allowance for doubtful accounts
     59,409       63,112  
Total inventories
     120,303       124,421  
Deferred income taxes and other current assets
     34,545       27,757  
Current assets of discontinued operations
     —       55,305  
 
            
Total current assets
     233,674       278,911  
Net property, plant and equipment
     179,573       194,589  
Other assets
     106,931       110,921  
Noncurrent assets of discontinued operations
     —       14,076  
 
            
Total assets
   $ 520,178     $ 598,497  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Short-term bank loans
   $ —     $ 42,500  
Accounts payable
     45,964       41,791  
Accrued liabilities
     42,785       48,121  
Current liabilities of discontinued operations
     —       9,378  
 
            
Total current liabilities
     88,749       141,790  
Long-term debt
     55,000       —  
Other noncurrent liabilities and deferred income taxes
     17,211       12,379  
Noncurrent liabilities of discontinued operations
     —       19  
Shareholders’ equity
     359,218       444,309  
 
            
Total liabilities and shareholders’ equity
   $ 520,178     $ 598,497  
 
            
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