LANCASTER COLONY CORP
For the period ended Dec 31, 2024. Filed Feb 4, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 4, 2025
MZTI$104.93-3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0000057515-24-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-04.
0000057515-25-000005
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 105 previous paragraphs and 118 current paragraphs.
85 unchanged; 19 reworded; 12 added; 1 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Consolidated net sales for the three months ended December 31, 2024 increased 4.8% to a second quarter record $509.3 million versus $485.9 million last year, reflecting higher net sales for both the Retail and Foodservice segments driven primarily by volume gains. Year-over-year comparisons for the Retail segment were unfavorably impacted by prior-year sales attributed to the perimeter-of-the-store bakery product lines we exited in March 2024. Breaking down the 4.8% increase in consolidated net sales, higher core volumes and product mix contributed approximately 580 basis points, as partially offset by approximately 110 basis points attributed to the perimeter-of-the-store bakery product lines we exited. The remaining impact was net pricing. Consolidated sales volumes, measured in pounds shipped, increased 3.3% for the three months ended December 31, 2024. Excluding the impact of all sales attributed to the perimeter-of-the-store bakery product lines, consolidated sales volumes increased 3.8%.
Current report
Consolidated gross profit for the three months ended December 31, 2024 increased $11.3 million to a second quarter record $132.8 million driven by the higher sales volumes and more favorable sales mix, the positive impacts of our ongoing cost savings initiatives and some modest cost deflation.
Current report
Selling, general and administrative (“SG&A”) expenses for the three months ended December 31, 2024 increased 2.5% to $57.1 million compared to $55.7 million in the prior-year period. This increase reflects $1.6 million in incremental expenditures attributed to our planned acquisition of an Atlanta-based sauce and dressing production facility in addition to increased investments in personnel and IT, as partially offset by reduced brokerage costs and prior-year expenses for Project Ascent.
Current report
Operating income increased $9.0 million to $131.5 million for the six months ended December 31, 2024 due to the increase in gross profit, as partially offset by the higher SG&A expenses. Costs related to the planned Atlanta plant acquisition totaled $1.6 million for the six months ended December 31, 2024.
Current report
Pension Settlement Charge
Current report
Prior to November 30, 2024, we sponsored multiple defined benefit pension plans that covered certain former employees under collective bargaining contracts related to closed or sold operations. All these plans were previously frozen. In August 2024, our Board of Directors approved the merger of all five pension plans and the termination of the resulting merged plan. The merged plan was terminated effective November 30, 2024. Lump sum distributions and annuity purchases from a highly rated insurance company were completed in December 2024. As a result of the pension termination, we incurred a one-time noncash settlement charge of $14.0 million for the three and six months ended December 31, 2024. See further discussion in Note 8 to the condensed consolidated financial statements.
Current report
For the six months ended December 31, 2024, diluted net income per share totaled $3.40, as compared to $3.47 per diluted share in the prior year. For the six months ended December 31, 2024, the pension settlement charge reduced diluted earnings per share by $0.39 and costs related to the planned Atlanta plant acquisition reduced diluted earnings per share by $0.05. For the six months ended December 31, 2023, expenditures for Project Ascent reduced diluted earnings per share by $0.16.
Current report
For the three months ended December 31, 2024, Retail segment net sales increased 6.3% to $280.8 million from the prior-year total of $264.0 million. The increase in Retail segment net sales reflects higher sales volumes resulting from growth in both our licensing program and our own brands. Year-over-year comparisons for the Retail segment were unfavorably impacted by prior-year sales attributed to the perimeter-of-the-store bakery product lines we exited in March 2024. Excluding the perimeter-of-the-store bakery product lines we exited, Retail net sales increased 8.4%. Key contributors to the increase in Retail segment net sales included our licensing program, most notably our recently introduced Texas Roadhouse® dinner rolls, as well as Buffalo Wild Wings® sauces, Subway® sauces and Olive Garden® dressings. Our Marzetti® brand caramel dips and refrigerated dressings also helped drive the increase in Retail net sales. Retail segment sales volumes, measured in pounds shipped, increased 6.0%. Excluding the impact of all sales attributed to our perimeter-of-the-store bakery product lines, Retail sales volumes increased 7.4%.
Current report
For the six months ended December 31, 2024, Retail segment operating income increased 11.2% to $125.2 million due to the higher sales volume and more favorable sales mix, our cost savings programs and some modest cost deflation.
Current report
For the three months ended December 31, 2024, Foodservice segment operating income increased 11.7% to $30.3 million driven by our cost savings programs, the beneficial impact of the higher sales volumes and some modest cost deflation, as partially offset by higher supply chain costs.
Current report
We also look forward to completing the asset purchase transaction for the Atlanta-based sauce and dressing production facility during our fiscal third quarter as an important strategic addition to our manufacturing network. This facility will benefit our core sauce and dressing operations through improved operational efficiency, incremental capacity, and closer proximity to certain core customers while enhancing our manufacturing network from a business continuity standpoint.
Current report
On November 18, 2024, we entered into a purchase agreement to acquire a sauce and dressing production facility and related real estate in the Atlanta, Georgia area along with certain equipment and assets contained in the facility for a purchase price of $75 million in cash, subject to closing adjustments. We intend to pay the purchase price with cash on hand. The transaction is expected to close during our fiscal third quarter ending March 31, 2025.
Removed paragraphs (1)
Previous report
•the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and
Reworded paragraphs (19)
Previous wording
Consolidated net sales for the three months ended September 30, 2024 increased 1.1% to a first quarter record $466.6 million versus $461.6 million last year, reflecting higher net sales for the Foodservice segment as partially offset by lower net sales for the Retail segment. The increase in Foodservice segment net sales was driven primarily by volume gains. The decline in Retail segment net sales reflects the impact of prior-year sales attributed to the perimeter-of-the-store bakery product lines we exited in March 2024. Breaking down the 1.1% increase in consolidated net sales, approximately 2.4% is attributed to volume/mix impacts partially offset by net pricing, including a higher level of trade spending in Retail. Consolidated sales volumes, measured in pounds shipped, increased 2.1% for the three months ended September 30, 2024. Excluding the impact of all sales attributed to the perimeter-of-the-store bakery product lines, consolidated sales volumes increased 2.7%.
Current wording
Consolidated net sales for the six months ended December 31, 2024 increased 3.0% to $975.9 million versus $947.5 million last year, reflecting higher net sales for both the Retail and Foodservice segments driven primarily by volume gains. As noted above, year-over-year comparisons for the Retail segment were unfavorably impacted by prior-year sales attributed to the perimeter-of-the-store bakery product lines we exited in March 2024. Breaking down the 3.0% increase in consolidated net sales, higher core volumes and product mix contributed approximately 470 basis points, as partially offset by approximately 120 basis points attributed to the perimeter-of-the-store bakery product lines we exited. The remaining impact was net pricing, including a higher level of trade spending in Retail. Consolidated sales volumes, measured in pounds shipped, increased 2.7% for the six months ended December 31, 2024. Excluding the impact of all sales attributed to the perimeter-of-the-store bakery product lines, consolidated sales volumes increased 3.3%.
Previous wording
Consolidated gross profit for the three months ended September 30, 2024 increased $2.1 million to a first quarter record $110.8 million driven by volume growth and our cost savings programs. Our pricing net of commodity costs, or PNOC, was close to neutral.
Current wording
Consolidated gross profit for the six months ended December 31, 2024 increased $13.4 million to $243.6 million driven by volume growth, the positive impacts of our cost savings programs and some modest cost deflation.
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2024 increased 5.8% to $55.0 million compared to $51.9 million in the prior-year period. This increase reflects higher expenditures to support the continued growth of our business, including investments in personnel and IT, in addition to higher legal costs, as partially offset by prior-year expenses for Project Ascent.
Current wording
SG&A expenses for the six months ended December 31, 2024 increased 4.1% to $112.1 million compared to $107.7 million in the prior year. This increase reflects higher expenditures to support the continued growth of our business, including investments in personnel and IT, in addition to costs related to the planned Atlanta plant acquisition and higher legal costs, as partially offset by prior-year expenses for Project Ascent and reduced brokerage costs.
Previous wording
Operating income decreased $0.9 million to $55.9 million for the three months ended September 30, 2024 due to the higher SG&A expenses, as partially offset by the increase in gross profit.
Current wording
Operating income increased $9.9 million to $75.7 million for the three months ended December 31, 2024 due to the increase in gross profit, as partially offset by the higher SG&A expenses. Costs related to the planned Atlanta plant acquisition totaled $1.6 million for the three months ended December 31, 2024.
Previous wording
Our effective tax rate was 22.8% and 23.7% for the three months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024 and 2023, our effective tax rate varied from the statutory federal income tax rate as a result of the following factors:
Current wording
Our effective tax rate was 22.6% and 23.5% for the six months ended December 31, 2024 and 2023, respectively. For the six months ended December 31, 2024 and 2023, our effective tax rate varied from the statutory federal income tax rate as a result of the following factors:
Previous wording
We include the tax consequences related to stock-based compensation within the computation of income tax expense. We may experience increased volatility to our income tax expense and resulting net income dependent upon, among other variables, the price of our common stock and the timing and volume of share-based payment award activity such as employee exercises of stock-settled stock appreciation rights, vesting of restricted stock awards and vesting of performance units. For the three months ended September 30, 2024 and 2023, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by 0.1% and less than 0.1%, respectively.
Current wording
We include the tax consequences related to stock-based compensation within the computation of income tax expense. We may experience increased volatility to our income tax expense and resulting net income dependent upon, among other variables, the price of our common stock and the timing and volume of share-based payment award activity such as employee exercises of stock-settled stock appreciation rights, vesting of restricted stock awards and vesting of performance units. For the six months ended December 31, 2024 and 2023, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by 0.1% and less than 0.1%, respectively.
Previous wording
As influenced by the factors discussed above, diluted net income per share for the first quarter of 2025 totaled $1.62, as compared to $1.59 per diluted share in the prior year.
Current wording
As influenced by the factors discussed above, diluted net income per share for the second quarter of 2025 totaled $1.78, as compared to $1.87 per diluted share in the prior year. For the three months ended December 31, 2024, the pension settlement charge reduced diluted earnings per share by $0.39 and costs related to the planned Atlanta plant acquisition reduced diluted earnings per share by $0.05. For the three months ended December 31, 2023, expenditures for Project Ascent reduced diluted earnings per share by $0.06.
Previous wording
For the three months ended September 30, 2024, Retail segment net sales decreased 1.1% to $239.6 million from the prior-year total of $242.2 million. The decrease in Retail segment net sales reflects the impact of sales attributed to the perimeter-of-the-store bakery product lines we exited in March 2024, in addition to a higher and more normalized level of trade spending as we invested more to support our brands and launch new items. Excluding the perimeter-of-the-store bakery product lines we exited, Retail net sales increased 1.4%. Retail segment net sales include volume gains for our licensing program led by our recently introduced Subway® sauces and expanding distribution for Texas Roadhouse® dinner rolls following a successful pilot test. Our Reames® frozen egg noodles also contributed to volume growth. Retail segment sales volumes, measured in pounds shipped, increased 0.3%. Excluding the impact of all sales attributed to our perimeter-of-the-store bakery product lines, Retail sales volumes increased 1.9%.
Current wording
For the six months ended December 31, 2024, Retail segment net sales increased 2.8% to $520.3 million compared to the prior-year total of $506.2 million. The increase in Retail segment net sales reflects higher sales volumes. Year-over-year comparisons for the Retail segment were unfavorably impacted by prior-year sales attributed to the perimeter-of-the-store bakery product lines we exited in March 2024. Excluding the perimeter-of-the-store bakery product lines we exited, Retail net sales increased 5.1%. Retail segment net sales growth was driven by our licensing program led by Texas Roadhouse® dinner rolls, Subway® sauces and Buffalo Wild Wings® sauces. Our Marzetti® brand caramel dips and refrigerated dressings, in addition to our recently introduced gluten-free New York BRAND® Bakery frozen garlic bread, also added to the growth in Retail net sales. Retail segment sales volumes, measured in pounds shipped, increased 3.3%. Excluding the impact of all sales attributed to our perimeter-of-the-store bakery product lines, Retail sales volumes increased 4.8%.
Previous wording
For the three months ended September 30, 2024, Retail segment operating income increased 5.7% to $56.2 million due to a more favorable sales mix and our cost savings programs.
Current wording
For the three months ended December 31, 2024, Retail segment operating income increased 16.0% to $69.0 million due to the higher sales volume and more favorable sales mix, our cost savings programs and some modest cost deflation.
Previous wording
For the three months ended September 30, 2024, Foodservice segment net sales grew 3.5% to $227.0 million compared to $219.4 million in the prior-year period driven by increased demand from several of our national chain restaurant account customers and growth for our Marzetti® branded Foodservice products. Foodservice segment sales volumes, measured in pounds shipped, increased 3.1%.
Current wording
For the three months ended December 31, 2024, Foodservice segment net sales grew 3.0% to $228.5 million compared to $221.9 million in the prior-year period driven by increased demand from several of our national chain restaurant account customers and growth for our Marzetti® branded Foodservice products. Foodservice segment sales volumes, measured in pounds shipped, increased 1.5%.
Previous wording
For the three months ended September 30, 2024, Foodservice segment operating income decreased 8.7% to $24.3 million driven by higher supply chain costs, investments in customer programs, and increased brokerage expenses, as partially offset by the beneficial impact of the higher sales volumes.
Current wording
For the six months ended December 31, 2024, Foodservice segment operating income increased 1.6% to $54.6 million driven by the beneficial impact of the higher sales volumes and modest cost deflation, as partially offset by higher supply chain costs and investments in customer programs.
Previous wording
For the three months ended September 30, 2024 and 2023, corporate expenses totaled $24.6 million and $23.0 million, respectively. This increase primarily reflects investments in personnel, as well as higher legal expenses.
Current wording
For the six months ended December 31, 2024 and 2023, corporate expenses totaled $48.3 million and $43.9 million, respectively. This increase primarily reflects investments in personnel, costs related to the planned Atlanta plant acquisition and higher legal expenses.
Previous wording
Looking forward to our fiscal second quarter and the remainder of our fiscal year, we anticipate Retail segment sales will continue to benefit from our growing licensing program, driven by our new product introductions, including Subway sauces and Texas Roadhouse dinner rolls. Our newly launched New York BRAND® Bakery gluten-free garlic bread will also add to the Retail segment’s sales. In the Foodservice segment, we anticipate continued volume gains from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including U.S. economic performance and consumer behavior, will likely impact demand. With respect to our input costs, in aggregate we do not foresee significant impacts from commodity cost inflation or deflation.
Current wording
Looking forward to our fiscal third quarter and the remainder of our fiscal year, we project Retail sales will continue to benefit from our expanding licensing program and growth from investments in innovation for our own brands such as New York BRAND® Bakery. In the Foodservice segment, we anticipate continued volume growth from select customers in our mix of national chain restaurant accounts. With respect to our input costs, in aggregate we do not foresee significant impacts from commodity cost inflation or deflation.
Previous wording
For the three months ended September 30, 2024, net cash provided by operating activities totaled $19.9 million, as compared to $35.6 million in the prior-year period. This decrease was primarily due to the year-over-year changes in net working capital, particularly accounts payable and other current assets. The current-year period reflected the unfavorable cash flow impacts of both lower accounts payable and higher prepaid federal income taxes while the prior-year period benefited from an increase in accounts payable. Changes in accounts payable were impacted by the timing of payments.
Current wording
For the six months ended December 31, 2024, net cash provided by operating activities totaled $127.5 million, as compared to $141.5 million in the prior-year period. This decrease was primarily due to the year-over-year changes in net working capital, particularly accounts receivable and accounts payable, as partially offset by inventories. The accounts receivable impact related to a large decline in the prior-year period due to the timing of sales and customer payments. The current-year period reflected the unfavorable cash flow impact of lower accounts payable as impacted by the timing of payments. These fluctuations were partially offset by the favorable cash flow impact of a decline in inventories due to lower levels of finished goods on-hand at December 31, 2024. Excluding the current-year noncash pension settlement charge, higher net income also provided a partial offset to the unfavorable working capital changes.
Previous wording
Cash used in investing activities for the three months ended September 30, 2024 of $19.9 million was comparable to $19.7 million in the prior year.
Current wording
Cash used in investing activities for the six months ended December 31, 2024 was $32.7 million, as compared to $40.2 million in the prior year. This decrease primarily reflects a lower level of payments for property additions in the current year.
Previous wording
Cash used in financing activities for the three months ended September 30, 2024 of $28.4 million decreased from the prior-year total of $30.6 million. This decrease reflects lower levels of share repurchases, as partially offset by higher tax withholdings for stock-based compensation and higher dividend payments.
Current wording
Cash used in financing activities for the six months ended December 31, 2024 of $55.2 million decreased from the prior-year total of $55.9 million. This decrease reflects lower levels of share repurchases, as partially offset by higher levels of dividend payments and tax withholdings for stock-based compensation.
Previous wording
We believe that cash provided by operating activities and our existing balances in cash and equivalents, in addition to that available under the Facility, should be adequate to meet our liquidity needs over the next 12 months, including the projected levels of capital expenditures and dividend payments. If we were to borrow outside of the Facility under current market terms, our average interest rate may increase and have an adverse effect on our results of operations. Based on our current plans and expectations, we believe our capital expenditures for 2025 could total between $70 and $80 million.
Current wording
We believe that cash provided by operating activities and our existing balances in cash and equivalents, in addition to that available under the Facility, should be adequate to meet our liquidity needs over the next 12 months, including the projected levels of capital expenditures, dividend payments and the acquisition discussed above. If we were to borrow outside of the Facility under current market terms, our average interest rate may increase and have an adverse effect on our results of operations. Based on our current plans and expectations, we believe our capital expenditures for 2025 could total between $70 and $80 million.
Previous wording
We have various contractual and other obligations that are appropriately recorded as liabilities in our condensed consolidated financial statements. Certain other contractual obligations are not recognized as liabilities in our condensed consolidated financial statements. Examples of such obligations are commitments to purchase raw materials or packaging inventory that has not yet been received as of September 30, 2024 and purchase orders and longer-term purchase arrangements related to the procurement of services, including IT service agreements, and property, plant and equipment. The majority of these obligations is expected to be due within one year.
Current wording
We have various contractual and other obligations that are appropriately recorded as liabilities in our condensed consolidated financial statements. Certain other contractual obligations are not recognized as liabilities in our condensed consolidated financial statements. Examples of such obligations are commitments to purchase raw materials or packaging inventory that has not yet been received as of December 31, 2024, the planned Atlanta plant acquisition discussed above, and purchase orders and longer-term purchase arrangements related to the procurement of services, including IT service agreements, and property, plant and equipment. The majority of these obligations is expected to be due within one year.
Previous wording
•changes in estimates in critical accounting judgments;
Current wording
•changes in estimates in critical accounting judgments; and
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
For the six months ended December 31, 2024, Foodservice segment net sales increased 3.2% to $455.5 million from the prior-year total of $441.3 million driven by increased demand from several of our national chain restaurant account customers and growth for our Marzetti® branded Foodservice products. Foodservice segment sales volumes, measured in pounds shipped, increased 2.3%.
Current report — wording carried from elsewhere
For the three months ended December 31, 2024 and 2023, corporate expenses totaled $23.7 million and $20.9 million, respectively. This increase primarily reflects investments in personnel and costs related to the planned Atlanta plant acquisition.