Lancaster Colony Corporation (NASDAQ:LANC) Q3 2018 Earnings Conference Call - Preliminary Transcript

Apr 26, 2018 • 10:00 am ET

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Lancaster Colony Corporation (NASDAQ:LANC) Q3 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good morning. My name is Sharon and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation Fiscal Year 2018 Third Quarter Conference Call. Conducting today's call will be Dave Ciesinski, President and CEO; and Doug Fell, Vice President, Treasurer and CFO. (Operator Instructions) Thank you. Now to begin the conference call, here is Dale Ganobsik, Director of Investor Relations for Lancaster Colony Corporation.

Executive
Dale Ganobsik

Thank you, Sharon. Good morning everyone and thank you for joining us today for Lancaster Colony's fiscal 2018 third quarter conference call. Let me begin by reminding everyone that our discussion this morning may include forward-looking statements, which are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC.

Also note that the audio replay of this call will be archived and available at the company's website, lancastercolony.com, later this afternoon. With that said, I'll now turn the call over to Lancaster Colony's President and CEO, Dave Ciesinski. Dave?

Executive
Dave Ciesinski

Thanks Dale, and good morning everyone. It's a pleasure to be here with you today as we review our third quarter results for fiscal year 2018. Doug and I will provide comments on the quarter and our outlook, following that we'll be happy to respond to any of your questions. For the quarter, consolidated net sales increased 0.8% to $296.2 million versus $293.8 million last year. Retail net sales increased 0.2% to $152 million as continued growth in shelf-stable dressings, deli -- bakery, frozen dinner rolls in the successful club test, our Buffalo Wild Wings sauces were offset by the lingering impact of the supply disruption on garlic toast; and lower sales for branded croutons and refrigerated dips. Given that Easter this year fell on April 1, and was only two week earlier than 2017, the year-over-year impact on the quarter was very modest.

Food service net sales grew 1.5% to $144.2 million, driven by volume increases for frozen rolls and pasta and pricing actions that were implemented to help offset higher freight and commodity cost. Consolidated gross profit declined $4 million to $67.9 million, due to the impact of significantly higher freight and commodity costs. Gross profit for the quarter was also waved down by increased depreciation expense and two unusual non-recurring charges. Savings realized from our lean six sigma and pricing were sequentially stronger, but only served to partially offset the aggregate cost increases in the quarter. SG&A expenses declined $2 million on reduced spending for consumer promotions and cost savings gained through the realignment and simplification of our retail broker network that was implemented in January.

Consolidated operating income increased from $22 million to $37.7 million, excluding the