Lancaster Colony Corp. engages in the manufacture and marketing of specialty food products. It operates through Retail and Foodservices segments. The Retail and Foodservices segments focuses in the manufacture and selling of frozen breads; refrigerated dressings and dips; and shelf-stable dressings and croutons under the brand name New York BRAND Bakery, Sister Schubert's, Marzetti Frozen Pasta, and Flatout. The company was founded in 1961 and is headquartered in Westerville, OH.
We may be subject to business disruptions, product recalls or other claims for real or perceived safety issues regarding our food products.
We may be subject to a loss of sales or increased costs due to adverse publicity or consumer concern regarding the safety, quality or healthfulness of food products, whether with our products, competing products or other related food products.
A disruption of production at certain manufacturing facilities could result in an inability to meet our customers’ demands for certain products, which could also negatively impact our ability to maintain adequate levels of product placement with our customers on a long-term basis.
Competitive conditions within our Retail and Foodservice markets could impact our sales volumes and operating profits.
Walmart is our largest Retail customer. The loss of, or a significant reduction in, Walmart’s business, or an adverse change in the financial condition of Walmart, could result in a material adverse effect on our business, results of operations, financial condition and cash flows.
McLane is our largest Foodservice customer. An adverse change in the financial condition of McLane could have a material adverse effect on our business, results of operations, financial condition and cash flows.
A single indirect national chain restaurant account represents a significant portion of our Foodservice segment sales. The loss of, or a significant reduction in, this national chain restaurant’s business, or an adverse change in the financial condition of this national chain restaurant, could result in a material adverse effect on our business, results of operations, financial condition and cash flows.
We rely on the performance of major retailers, mass merchants, wholesalers, food brokers, distributors and foodservice customers for the success of our business and, should they perform poorly or give higher priority to other brands or products, our business could be adversely affected.
We rely on the value of the brands we sell, and the failure to maintain and enhance these brands could adversely affect our business.
Increases in the costs or limitations to the availability of raw materials we use to produce and package our products could adversely affect our business by increasing our costs to produce goods.
The availability and cost of transportation for our products is vital to our success, and the loss of availability or increase in the cost of transportation could have an unfavorable impact on our business, results of operations, financial condition and cash flows.
We are subject to federal, state and local government regulations that could adversely affect our business and results of operations.
We may require significant capital expenditures to maintain, improve or replace aging infrastructure and facilities, which could adversely affect our cash flows.
Manufacturing capacity constraints may have a material adverse effect on our business, results of operations, financial condition and cash flows.
We may experience difficulties in designing and implementing our new enterprise resource planning system.
Technology failures could disrupt our operations and negatively impact our business.
Cyber attacks, data breaches or other breaches of our information security systems could have an adverse effect on our business, results of operations, financial condition and cash flows.
We may not be able to successfully consummate proposed acquisitions or divestitures, and integrating acquired businesses may present financial, managerial and operational challenges.
Our inability to successfully renegotiate collective bargaining contracts and any prolonged work stoppages could have an adverse effect on our business, results of operations, financial condition and cash flows.
We may incur liabilities related to multiemployer pension plans which could adversely affect our financial results.
Increases in energy-related costs could negatively affect our business by increasing our costs to produce goods.
The loss of the services of one or more members of our senior management team could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Mr. Gerlach, Executive Chairman of our Board of Directors, has a significant ownership interest in our Company.
Anti-takeover provisions could make it more difficult for a third party to acquire us.
In 2019, net sales for the Retail segment reached $656.6 million, a 1% increase from the prior-year total of $650.2 million. Excluding the incremental sales from Bantam, Retail net sales improved 0.5% as influenced by volume gains for shelf-stable dressings and sauces sold under license agreements, improved net price realization and lower coupon expense. Notable offsets to Retail sales growth included volume declines in flatbread wraps and our decision to selectively exit some low-margin private-label business.
In 2019, Retail segment operating income was favorably impacted by the $17.1 million reduction in the fair value of Angelic’s contingent consideration liability. Excluding this fair value reduction, Retail segment operating income declined to $118.0 million as influenced by incremental costs, including facility upgrades, associated with the Omni operations, investments to strengthen the Retail leadership team and incremental spending to expand distribution for Bantam.
In 2019, Foodservice net sales increased 14% to $651.2 million from the 2018 total of $572.7 million. Excluding incremental contributions of $7.3 million from Bantam and $19.4 million from Omni, Foodservice sales growth of 9% was widespread throughout the segment with national chain restaurant accounts, branded products and frozen pasta products all contributing to growth. The higher level of branded product sales was attributed in part to new product introductions and expanded distribution with colleges and universities. Note that all of the Omni sales are due to an interim agreement whereby, for a period of up to two years post-closing, we will be a supplier of bread products to an affiliated party of the seller.