Lancaster Colony(LANC) - 2021 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for the three months ended September 30, 2020, and 2019, detailing financial position, performance, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $1.024 billion from $993.4 million as of September 30, 2020, driven by higher inventories and property, plant, and equipment | (Amounts in thousands) | September 30, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Total current assets | $408,407 | $385,612 | | Property, plant and equipment-net | $299,477 | $293,288 | | Total Assets | $1,024,368 | $993,353 | | Total current liabilities | $139,819 | $126,259 | | Total shareholders' equity | $801,106 | $783,300 | | Total Liabilities and Shareholders' Equity | $1,024,368 | $993,353 | Condensed Consolidated Statements of Income Net sales increased to $349.2 million for the three months ended September 30, 2020, but operating income and net income declined, resulting in lower diluted EPS | (Amounts in thousands, except per share data) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net Sales | $349,237 | $337,054 | | Gross Profit | $92,654 | $92,108 | | Operating Income | $48,948 | $51,704 | | Net Income | $37,079 | $40,745 | | Basic and diluted EPS | $1.35 | $1.48 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the quarter ended September 30, 2020, decreased to $37.2 million from $40.8 million in the prior year, primarily due to lower net income | (Amounts in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net Income | $37,079 | $40,745 | | Other Comprehensive Income, Net of Tax | $94 | $70 | | Comprehensive Income | $37,173 | $40,815 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $23.6 million for the three months ended September 30, 2020, primarily due to increased inventories, with shifts in investing and financing activities | (Amounts in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,643 | $40,095 | | Net cash used in investing activities | ($14,548) | ($43,345) | | Net cash used in financing activities | ($21,280) | ($19,577) | | Net change in cash and equivalents | ($12,185) | ($22,827) | Condensed Consolidated Statements of Shareholders' Equity Total shareholders' equity increased to $801.1 million as of September 30, 2020, driven by $37.1 million in net income, partially offset by $19.3 million in cash dividends - For the three months ended September 30, 2020, shareholders' equity increased by $17.8 million, reflecting $37.1 million in net income less $19.3 million in cash dividends ($0.70 per share)[19] Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, fair value measurements, and segment performance, highlighting a $5.7 million reduction in contingent consideration and a $1.2 million impairment charge, alongside COVID-19 impacts on Retail and Foodservice - A $5.7 million reduction in the fair value of Bantam's contingent consideration was recorded, reflecting the impact of a SKU rationalization by a Foodservice customer[37] - Impairment charges of $1.2 million were recorded related to certain tradename and technology/know-how intangible assets for Bantam due to the loss of future sales to a Foodservice customer[47] | (Amounts in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Retail Net Sales | $193,725 | $166,077 | | Foodservice Net Sales | $155,512 | $170,977 | | Total Net Sales | $349,237 | $337,054 | | Retail Operating Income | $42,658 | $39,016 | | Foodservice Operating Income | $27,421 | $26,975 | | Total Operating Income | $48,948 | $51,704 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net sales grew 4% to $349.2 million, driven by Retail segment growth offset by Foodservice decline, while operating income decreased 5% to $48.9 million due to higher SG&A and manufacturing costs - Retail segment net sales increased 17% to $193.7 million, driven by higher demand for at-home food consumption due to the COVID-19 outbreak[86] - Foodservice segment net sales decreased 9% to $155.5 million as demand remained constrained by the impacts of COVID-19 on the restaurant industry[87] - SG&A expenses increased 22% to $48.2 million, primarily due to a $5.6 million increase in expenditures for the Project Ascent ERP implementation, totaling $8.3 million for the quarter[75] - A favorable adjustment of $5.7 million related to Bantam's contingent consideration increased Foodservice operating income and diluted EPS by $0.16 for the quarter[78][85][88] - The company expects capital expenditures for fiscal 2021 to be between $70 million and $90 million[97] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risks since the 2020 Annual Report on Form 10-K - There have been no material changes to market risks since the 2020 Annual Report on Form 10-K[103] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[104] - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[105] PART II – OTHER INFORMATION Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2020 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's 2020 Annual Report on Form 10-K[107] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 86 shares at an average price of $171.22 per share, primarily for tax withholding, with 1,315,825 shares remaining authorized for future repurchase as of September 30, 2020 | Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | July 1-31, 2020 | — | $ — | | August 1-31, 2020 | 42 | $168.66 | | September 1-30, 2020 | 44 | $173.66 | | Total | 86 | $171.22 | - As of September 30, 2020, 1,315,825 common shares remained authorized for future repurchases under the company's share repurchase authorization[108] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications under the Sarbanes-Oxley Act and XBRL data files - The exhibits filed with this report include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002, along with Inline XBRL documents[116]