Lancaster Colony(LANC) - 2026 Q2 - Quarterly Report

Sales Performance - Consolidated net sales for the three months ended December 31, 2025 increased 1.7% to $518.0 million, driven by higher Foodservice segment sales, partially offset by lower Retail segment sales [78]. - For the six months ended December 31, 2025, consolidated net sales rose 3.6% to $1,011.4 million, reflecting growth in both Retail and Foodservice segments [79]. - Retail segment net sales for the three months ended December 31, 2025, decreased by 1.1% to $277.5 million, while operating income fell by 9.1% to $62.8 million [97][98]. - Foodservice segment net sales for the three months ended December 31, 2025, grew by 5.2% to $240.4 million, with operating income increasing by 21.3% to $36.8 million [100][102]. - For the six months ended December 31, 2025, Foodservice segment net sales rose by 6.7% to $486.1 million, with operating income increasing by 31.0% to $71.6 million [101][103]. Profitability - Consolidated gross profit for the three months ended December 31, 2025 increased by $4.5 million to a record $137.3 million, with gross margin improving by 40 basis points [83]. - Operating income for the three months ended December 31, 2025 decreased by $0.5 million to $75.2 million, impacted by increased SG&A expenses and restructuring charges [89]. - Net income for the three months ended December 31, 2025 increased by 20.6% to $59.1 million, with diluted net income per share rising 20.8% to $2.15 [77]. - Adjusted operating income for the three months ended December 31, 2025, was $76,851,000, reflecting a decrease of 0.6% compared to the previous year [119]. - The gross profit for the six months ended December 31, 2025, was $256,079,000, with an adjusted gross margin of 25.8% [117]. Expenses - Selling, general and administrative expenses for the three months ended December 31, 2025 rose 5.8% to $60.4 million, primarily due to higher marketing costs [85]. - The company recorded restructuring and impairment charges of $1.7 million for the three months ended December 31, 2025, related to the closure of a production facility [87]. - The company incurred $1.7 million in restructuring and impairment charges for the three months ended December 31, 2025, primarily related to manufacturing equipment impairment [118]. - Corporate expenses for the six months ended December 31, 2025, totaled $49.1 million, a slight increase from $48.3 million in the prior year [104]. Cash Flow - Net cash provided by operating activities for the six months ended December 31, 2025, totaled $158.1 million, up from $127.5 million in the prior year [106]. - Cash used in investing activities increased to $39.8 million for the six months ended December 31, 2025, compared to $32.7 million in the prior year [107]. Future Outlook - The company anticipates continued growth in Retail segment sales driven by an expanding licensing program and investments in innovation, while managing input cost inflation through pricing and cost savings programs [105]. - The company anticipates potential risks related to the integration of the Bachan's, Inc. transaction and operational performance objectives [123]. Taxation - The effective tax rate for the six months ended December 31, 2025, was 22.5%, slightly down from 22.6% in 2024, influenced by state and local income taxes and stock-based compensation [93]. Market and Accounting Policies - There were no changes in critical accounting policies from the previous annual report [120]. - Market risks have not changed materially from those disclosed in the 2025 Annual Report [124].