Lancaster Colony(LANC) - 2024 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Q3 2024 and 2023, detailing financial performance, position, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $1.172 billion as of March 31, 2024, primarily due to a rise in cash and equivalents, with shareholders' equity also growing | Balance Sheet Highlights (in thousands) | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $440,731 | $374,463 | | Cash and equivalents | $164,756 | $88,473 | | Property, plant and equipment-net | $483,662 | $482,206 | | Total Assets | $1,172,012 | $1,112,994 | | Total Current Liabilities | $189,786 | $168,752 | | Total Shareholders' Equity | $912,852 | $862,267 | Condensed Consolidated Statements of Income Net sales and net income increased for both the third quarter and nine-month period ended March 31, 2024, despite a restructuring and impairment charge | Income Statement (in thousands, except EPS) | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $471,446 | $464,935 | $1,418,934 | $1,367,866 | | Gross Profit | $104,494 | $94,237 | $334,684 | $295,394 | | Operating Income | $35,146 | $29,408 | $157,675 | $130,033 | | Net Income | $28,350 | $24,555 | $123,785 | $102,120 | | Diluted EPS | $1.03 | $0.89 | $4.50 | $3.71 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased for the nine months ended March 31, 2024, driven by higher net income, leading to a substantial increase in cash and equivalents | Cash Flow Summary (9 Months Ended, in thousands) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $217,454 | $184,151 | | Net cash used in investing activities | ($57,358) | ($78,921) | | Net cash used in financing activities | ($83,813) | ($82,652) | | Net change in cash and equivalents | $76,283 | $22,578 | | Cash and equivalents at end of period | $164,756 | $82,861 | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting events, including restructuring charges for exiting bakery product lines, a new credit facility, and segment performance highlights - In Q3 2024, the company recorded a $12.1 million restructuring and impairment charge and a $2.6 million inventory write-down related to its decision to exit its perimeter-of-the-store bakery product lines (Flatout and Angelic Bakehouse)[25][43][72] - On March 6, 2024, the company entered into a new five-year, $150 million unsecured revolving credit facility, replacing the previous one. No borrowings were outstanding as of March 31, 2024[35][36][38] | Segment Performance (Q3 2024 vs Q3 2023, in thousands) | Net Sales | % Change | Operating Income | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail | $248,054 | +0.3% | $47,313 | +28.1% | | Foodservice | $223,392 | +2.6% | $24,334 | +8.6% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses record Q3 net sales, improved profitability despite restructuring charges, and anticipates continued growth from expanding licensing programs Results of Consolidated Operations Consolidated net sales and gross profit increased in Q3 FY24, with operating income and diluted EPS rising despite significant restructuring and inventory write-down charges | Consolidated Operations (Q3 2024 vs Q3 2023) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $471.4M | $464.9M | +1.4% | | Gross Profit | $104.5M | $94.2M | +10.9% | | Operating Income | $35.1M | $29.4M | +19.5% | | Diluted EPS | $1.03 | $0.89 | +15.7% | - The 1.4% increase in consolidated net sales was attributed to a 2.9% volume/mix gain, partially offset by deflationary pricing in Foodservice and increased trade spending in Retail[65] - Costs related to exiting the perimeter-of-the-store bakery product lines reduced diluted EPS by a total of $0.41 in Q3 2024[77] Results of Operations - Segments Both Retail and Foodservice segments reported net sales growth in Q3, with Retail operating income significantly increasing and Foodservice operating income also rising - Retail segment Q3 sales volume increased 1.5%, driven by licensed sauces (Chick-fil-A, Subway, Texas Roadhouse) and Olive Garden dressings. Operating income grew 28.1% due to favorable pricing net of commodity costs and cost savings programs[80] - Foodservice segment Q3 sales volume increased 3.9%, driven by demand from national chain restaurant customers. Operating income grew 8.6% due to favorable pricing net of commodity costs and higher volumes[82][83] Financial Condition and Liquidity Operating cash flow increased for the nine months ended March 31, 2024, and the company renewed its $150 million credit facility, ensuring sufficient liquidity for future needs - Net cash from operating activities for the nine months ended March 31, 2024, increased to $217.5 million from $184.2 million in the prior year, mainly due to higher net income[88] - The company renewed its $150 million unsecured revolving credit facility in March 2024, which expires in March 2029. The company was in compliance with all covenants as of March 31, 2024[91][92] - Projected capital expenditures for fiscal 2024 are estimated to be $65 million[94] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risks since the 2023 Annual Report on Form 10-K - There have been no material changes to the company's market risks since the 2023 Annual Report on Form 10-K[100] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[101] - No changes were made to internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[102] PART II – OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings, including environmental matters above a $1 million disclosure threshold - The company reports no environmental matters to disclose, using a materiality threshold of $1 million for proceedings involving a governmental authority[105] Risk Factors There have been no material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the 2023 Annual Report on Form 10-K[106] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased common stock during the quarter, primarily for tax obligations, with a significant number of shares remaining authorized for future repurchase | Share Repurchases (Q3 2024) | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Total | 4,664 | $199.18 | - As of March 31, 2024, 1,131,690 common shares remained authorized for future repurchase under the company's share repurchase authorization[107] Exhibits This section lists the exhibits filed with the Form 10-Q, including the new Credit Agreement, CEO/CFO certifications, and XBRL data files - Key exhibits filed include a new Credit Agreement, CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and Inline XBRL documents[110]