Form 10-Q |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Lancaster Colony Corporation | ||
(Exact name of registrant as specified in its charter) | ||
Ohio | 13-1955943 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
380 Polaris Parkway, Suite 400 Westerville, Ohio | 43082 | |
(Address of principal executive offices) | (Zip Code) |
614-224-7141 |
(Registrant’s telephone number, including area code) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | o | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
(Amounts in thousands, except share data) | September 30, 2018 | June 30, 2018 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and equivalents | $ | 217,935 | $ | 205,752 | |||
Receivables | 83,398 | 72,960 | |||||
Inventories: | |||||||
Raw materials | 37,568 | 32,673 | |||||
Finished goods | 65,254 | 58,188 | |||||
Total inventories | 102,822 | 90,861 | |||||
Other current assets | 6,315 | 9,304 | |||||
Total current assets | 410,470 | 378,877 | |||||
Property, Plant and Equipment: | |||||||
Land, buildings and improvements | 133,409 | 132,318 | |||||
Machinery and equipment | 302,911 | 293,409 | |||||
Total cost | 436,320 | 425,727 | |||||
Less accumulated depreciation | 240,548 | 234,914 | |||||
Property, plant and equipment-net | 195,772 | 190,813 | |||||
Other Assets: | |||||||
Goodwill | 168,030 | 168,030 | |||||
Other intangible assets-net | 55,211 | 56,176 | |||||
Other noncurrent assets | 10,700 | 10,595 | |||||
Total | $ | 840,183 | $ | 804,491 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 67,483 | $ | 57,978 | |||
Accrued liabilities | 40,018 | 35,789 | |||||
Total current liabilities | 107,501 | 93,767 | |||||
Other Noncurrent Liabilities | 41,298 | 41,638 | |||||
Deferred Income Taxes | 17,365 | 16,804 | |||||
Commitments and Contingencies | |||||||
Shareholders’ Equity: | |||||||
Preferred stock-authorized 3,050,000 shares; outstanding-none | |||||||
Common stock-authorized 75,000,000 shares; outstanding-September-27,489,554 shares; June-27,487,989 shares | 119,985 | 119,232 | |||||
Retained earnings | 1,301,876 | 1,279,343 | |||||
Accumulated other comprehensive loss | (8,215 | ) | (8,259 | ) | |||
Common stock in treasury, at cost | (739,627 | ) | (738,034 | ) | |||
Total shareholders’ equity | 674,019 | 652,282 | |||||
Total | $ | 840,183 | $ | 804,491 |
Three Months Ended September 30, | |||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | |||||
Net Sales | $ | 316,654 | $ | 298,916 | |||
Cost of Sales | 235,455 | 223,441 | |||||
Gross Profit | 81,199 | 75,475 | |||||
Selling, General and Administrative Expenses | 32,079 | 31,299 | |||||
Operating Income | 49,120 | 44,176 | |||||
Other, Net | 1,314 | 508 | |||||
Income Before Income Taxes | 50,434 | 44,684 | |||||
Taxes Based on Income | 11,406 | 15,298 | |||||
Net Income | $ | 39,028 | $ | 29,386 | |||
Net Income Per Common Share: | |||||||
Basic and diluted | $ | 1.42 | $ | 1.07 | |||
Cash Dividends Per Common Share | $ | 0.60 | $ | 0.55 | |||
Weighted Average Common Shares Outstanding: | |||||||
Basic | 27,424 | 27,396 | |||||
Diluted | 27,514 | 27,451 |
Three Months Ended September 30, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
Net Income | $ | 39,028 | $ | 29,386 | |||
Other Comprehensive Income: | |||||||
Defined Benefit Pension and Postretirement Benefit Plans: | |||||||
Amortization of loss, before tax | 103 | 134 | |||||
Amortization of prior service credit, before tax | (46 | ) | (45 | ) | |||
Total Other Comprehensive Income, Before Tax | 57 | 89 | |||||
Tax Attributes of Items in Other Comprehensive Income: | |||||||
Amortization of loss, tax | (24 | ) | (49 | ) | |||
Amortization of prior service credit, tax | 11 | 16 | |||||
Total Tax Expense | (13 | ) | (33 | ) | |||
Other Comprehensive Income, Net of Tax | 44 | 56 | |||||
Comprehensive Income | $ | 39,072 | $ | 29,442 |
Three Months Ended September 30, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
Cash Flows From Operating Activities: | |||||||
Net income | $ | 39,028 | $ | 29,386 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Impacts of noncash items: | |||||||
Depreciation and amortization | 6,944 | 6,416 | |||||
Change in acquisition-related contingent consideration | — | 488 | |||||
Deferred income taxes and other changes | 879 | (1,622 | ) | ||||
Stock-based compensation expense | 1,531 | 1,163 | |||||
Pension plan activity | (309 | ) | (134 | ) | |||
Changes in operating assets and liabilities: | |||||||
Receivables | (10,325 | ) | (13,026 | ) | |||
Inventories | (11,961 | ) | (8,890 | ) | |||
Other current assets | 2,763 | 5,971 | |||||
Accounts payable and accrued liabilities | 12,310 | 19,162 | |||||
Net cash provided by operating activities | 40,860 | 38,914 | |||||
Cash Flows From Investing Activities: | |||||||
Cash paid for acquisitions, net of cash acquired | — | (318 | ) | ||||
Payments for property additions | (9,740 | ) | (8,494 | ) | |||
Other-net | (71 | ) | 8 | ||||
Net cash used in investing activities | (9,811 | ) | (8,804 | ) | |||
Cash Flows From Financing Activities: | |||||||
Payment of dividends | (16,495 | ) | (15,092 | ) | |||
Purchase of treasury stock | (1,593 | ) | (849 | ) | |||
Tax withholdings for stock-based compensation | (778 | ) | (95 | ) | |||
Net cash used in financing activities | (18,866 | ) | (16,036 | ) | |||
Net change in cash and equivalents | 12,183 | 14,074 | |||||
Cash and equivalents at beginning of year | 205,752 | 143,104 | |||||
Cash and equivalents at end of period | $ | 217,935 | $ | 157,178 | |||
Supplemental Disclosure of Operating Cash Flows: | |||||||
Net cash payments for income taxes | $ | 229 | $ | 620 |
September 30, | |||||||
2018 | 2017 | ||||||
Construction in progress in Accounts Payable | $ | 3,219 | $ | 590 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Net income | $ | 39,028 | $ | 29,386 | |||
Net income available to participating securities | (82 | ) | (47 | ) | |||
Net income available to common shareholders | $ | 38,946 | $ | 29,339 | |||
Weighted average common shares outstanding – basic | 27,424 | 27,396 | |||||
Incremental share effect from: | |||||||
Nonparticipating restricted stock | 5 | 4 | |||||
Stock-settled stock appreciation rights | 85 | 51 | |||||
Weighted average common shares outstanding – diluted | 27,514 | 27,451 | |||||
Net income per common share – basic and diluted | $ | 1.42 | $ | 1.07 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Accumulated other comprehensive loss at beginning of period | $ | (8,259 | ) | $ | (8,936 | ) | |
Defined Benefit Pension Plan Items: | |||||||
Amortization of unrecognized net loss | 112 | 143 | |||||
Postretirement Benefit Plan Items: | |||||||
Amortization of unrecognized net gain | (9 | ) | (9 | ) | |||
Amortization of prior service credit | (46 | ) | (45 | ) | |||
Total other comprehensive income, before tax | 57 | 89 | |||||
Total tax expense | (13 | ) | (33 | ) | |||
Other comprehensive income, net of tax | 44 | 56 | |||||
Accumulated other comprehensive loss at end of period | $ | (8,215 | ) | $ | (8,880 | ) |
Fair Value Measurements at September 30, 2018 | ||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
Acquisition-related contingent consideration | $ | — | $ | — | $ | 17,080 | $ | 17,080 | ||||
Fair Value Measurements at June 30, 2018 | ||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
Acquisition-related contingent consideration | $ | — | $ | — | $ | 17,080 | $ | 17,080 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Acquisition-related contingent consideration at beginning of period | $ | 17,080 | $ | 15,028 | |||
Additions | — | — | |||||
Changes in fair value included in Selling, General and Administrative Expenses | — | 488 | |||||
Acquisition-related contingent consideration at end of period | $ | 17,080 | $ | 15,516 |
September 30, 2018 | June 30, 2018 | ||||||
Tradenames (20 to 30-year life) | |||||||
Gross carrying value | $ | 50,321 | $ | 50,321 | |||
Accumulated amortization | (5,556 | ) | (5,071 | ) | |||
Net carrying value | $ | 44,765 | $ | 45,250 | |||
Trademarks (27-year life) | |||||||
Gross carrying value | $ | — | $ | 370 | |||
Accumulated amortization | — | (370 | ) | ||||
Net carrying value | $ | — | $ | — | |||
Customer Relationships (10 to 15-year life) | |||||||
Gross carrying value | $ | 14,207 | $ | 14,207 | |||
Accumulated amortization | (8,564 | ) | (8,283 | ) | |||
Net carrying value | $ | 5,643 | $ | 5,924 | |||
Technology / Know-how (10-year life) | |||||||
Gross carrying value | $ | 6,350 | $ | 6,350 | |||
Accumulated amortization | (1,841 | ) | (1,682 | ) | |||
Net carrying value | $ | 4,509 | $ | 4,668 | |||
Non-compete Agreements (5-year life) | |||||||
Gross carrying value | $ | 791 | $ | 791 | |||
Accumulated amortization | (497 | ) | (457 | ) | |||
Net carrying value | $ | 294 | $ | 334 | |||
Total net carrying value | $ | 55,211 | $ | 56,176 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Amortization expense | $ | 965 | $ | 967 |
2020 | $ | 3,823 | |
2021 | $ | 3,738 | |
2022 | $ | 3,664 | |
2023 | $ | 3,105 | |
2024 | $ | 3,105 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Net Sales | |||||||
Retail | $ | 162,748 | $ | 162,144 | |||
Foodservice | 153,906 | 136,772 | |||||
Total | $ | 316,654 | $ | 298,916 | |||
Operating Income | |||||||
Retail | $ | 33,948 | $ | 32,869 | |||
Foodservice | 18,861 | 14,690 | |||||
Corporate Expenses | (3,689 | ) | (3,383 | ) | |||
Total | $ | 49,120 | $ | 44,176 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Retail | |||||||
Frozen breads | $ | 57,508 | $ | 58,620 | |||
Refrigerated dressings, dips and other | 61,869 | 63,400 | |||||
Shelf-stable dressings and croutons | 43,371 | 40,124 | |||||
Total Retail net sales | $ | 162,748 | $ | 162,144 | |||
Foodservice | |||||||
Dressings and sauces | $ | 115,912 | $ | 103,059 | |||
Frozen breads and other | 37,994 | 33,713 | |||||
Total Foodservice net sales | $ | 153,906 | $ | 136,772 | |||
Total net sales | $ | 316,654 | $ | 298,916 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Foodservice | |||||||
National accounts | $ | 115,575 | $ | 100,412 | |||
Branded and other | 38,331 | 36,360 | |||||
Total Foodservice net sales | $ | 153,906 | $ | 136,772 |
• | leading Retail market positions in several product categories with a high-quality perception; |
• | recognized innovation in Retail products; |
• | a broad customer base in both Retail and Foodservice accounts; |
• | well-regarded culinary expertise among Foodservice customers; |
• | recognized leadership in Foodservice product development; |
• | experience in integrating complementary business acquisitions; and |
• | historically strong cash flow generation that supports growth opportunities. |
• | introducing new products and expanding distribution; |
• | leveraging the strength of our Retail brands to increase current product sales; |
• | continuing to rely upon the strength of our reputation in Foodservice product development and quality; and |
• | acquiring complementary businesses. |
Three Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | Change | |||||||||||
Net Sales | ||||||||||||||
Retail | $ | 162,748 | $ | 162,144 | $ | 604 | — | % | ||||||
Foodservice | 153,906 | 136,772 | 17,134 | 13 | % | |||||||||
Total | $ | 316,654 | $ | 298,916 | $ | 17,738 | 6 | % | ||||||
Gross Profit | $ | 81,199 | $ | 75,475 | $ | 5,724 | 8 | % | ||||||
Gross Margin | 25.6 | % | 25.2 | % |
Three Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | Change | |||||||||||
SG&A Expenses | $ | 32,079 | $ | 31,299 | $ | 780 | 2 | % | ||||||
SG&A Expenses as a Percentage of Net Sales | 10.1 | % | 10.5 | % |
Three Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | Change | |||||||||||
Operating Income | ||||||||||||||
Retail | $ | 33,948 | $ | 32,869 | $ | 1,079 | 3 | % | ||||||
Foodservice | 18,861 | 14,690 | 4,171 | 28 | % | |||||||||
Corporate Expenses | (3,689 | ) | (3,383 | ) | (306 | ) | 9 | % | ||||||
Total | $ | 49,120 | $ | 44,176 | $ | 4,944 | 11 | % | ||||||
Operating Margin | ||||||||||||||
Retail | 20.9 | % | 20.3 | % | ||||||||||
Foodservice | 12.3 | % | 10.7 | % | ||||||||||
Total | 15.5 | % | 14.8 | % |
Three Months Ended September 30, | |||||
2018 | 2017 | ||||
Statutory rate | 21.0 | % | 35.0 | % | |
State and local income taxes | 2.5 | 2.9 | |||
Domestic manufacturing deduction for qualified income | — | (3.4 | ) | ||
Net windfall tax benefits - stock-based compensation | (0.8 | ) | (0.2 | ) | |
Other | (0.1 | ) | (0.1 | ) | |
Effective rate | 22.6 | % | 34.2 | % |
Three Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | Change | |||||||||||
Net Sales | $ | 162,748 | $ | 162,144 | $ | 604 | — | % | ||||||
Operating Income | $ | 33,948 | $ | 32,869 | $ | 1,079 | 3 | % | ||||||
Operating Margin | 20.9 | % | 20.3 | % |
Three Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | Change | |||||||||||
Net Sales | $ | 153,906 | $ | 136,772 | $ | 17,134 | 13 | % | ||||||
Operating Income | $ | 18,861 | $ | 14,690 | $ | 4,171 | 28 | % | ||||||
Operating Margin | 12.3 | % | 10.7 | % |
• | the ability to successfully grow recently acquired businesses; |
• | the extent to which recent and future business acquisitions are completed and acceptably integrated; |
• | stability of labor relations; |
• | fluctuations in the cost and availability of ingredients and packaging; |
• | adverse changes in freight, energy or other costs of producing, distributing or transporting our products; |
• | price and product competition; |
• | the reaction of customers or consumers to price increases we may implement; |
• | the potential for loss of larger programs or key customer relationships; |
• | the impact of customer store brands on our branded retail volumes; |
• | capacity constraints that may affect our ability to meet demand or may increase our costs; |
• | dependence on contract manufacturers, distributors and freight transporters; |
• | changes in estimates in critical accounting judgments; |
• | the success and cost of new product development efforts; |
• | the lack of market acceptance of new products; |
• | dependence on key personnel and changes in key personnel; |
• | the effect of consolidation of customers within key market channels; |
• | the possible occurrence of product recalls or other defective or mislabeled product costs; |
• | changes in demand for our products, which may result from loss of brand reputation or customer goodwill; |
• | maintenance of competitive position with respect to other manufacturers; |
• | efficiencies in plant operations; |
• | the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand; |
• | the outcome of any litigation or arbitration; |
• | the impact, if any, of certain contingent liabilities associated with our withdrawal from a multiemployer pension plan; |
• | the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and |
• | certain other factors, including the information disclosed in our discussion of risk factors under Item 1A of our 2018 Annual Report on Form 10-K. |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares that May Yet be Purchased Under the Plans | ||||||||
July 1-31, 2018 | — | $ | — | — | 1,402,219 | |||||||
August 1-31, 2018 | — | $ | — | — | 1,402,219 | |||||||
September 1-30, 2018 | 10,000 | $ | 159.31 | 10,000 | 1,392,219 | |||||||
Total | 10,000 | $ | 159.31 | 10,000 | 1,392,219 |
LANCASTER COLONY CORPORATION | |||||
(Registrant) | |||||
Date: | November 1, 2018 | By: | /s/ DAVID A. CIESINSKI | ||
David A. Ciesinski | |||||
President, Chief Executive Officer | |||||
and Director | |||||
(Principal Executive Officer) | |||||
Date: | November 1, 2018 | By: | /s/ DOUGLAS A. FELL | ||
Douglas A. Fell | |||||
Vice President, Assistant Secretary | |||||
and Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |
Exhibit Number | Description | Located at | ||
101.INS | XBRL Instance Document | Filed herewith | ||
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith | ||
1. | I have reviewed this quarterly report on Form 10-Q of Lancaster Colony Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 1, 2018 | By: | /s/ DAVID A. CIESINSKI | ||
David A. Ciesinski | |||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Lancaster Colony Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 1, 2018 | By: | /s/ DOUGLAS A. FELL | ||
Douglas A. Fell | |||||
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ DAVID A. CIESINSKI | |
David A. Ciesinski | ||
Chief Executive Officer | ||
November 1, 2018 | ||
By: | /s/ DOUGLAS A. FELL | |
Douglas A. Fell | ||
Chief Financial Officer | ||
November 1, 2018 |
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Oct. 18, 2018 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000057515 | |
Entity Registrant Name | LANCASTER COLONY CORP | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 27,489,456 | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2019 | |
Current Fiscal Year End Date | --06-30 |
Condensed Consolidated Balance Sheets (Parenthetical) - shares |
Sep. 30, 2018 |
Jun. 30, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized | 3,050,000 | 3,050,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares outstanding | 27,489,554 | 27,487,989 |
Condensed Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||
Net Sales | $ 316,654 | $ 298,916 |
Cost of Sales | 235,455 | 223,441 |
Gross Profit | 81,199 | 75,475 |
Selling, General and Administrative Expenses | 32,079 | 31,299 |
Operating Income | 49,120 | 44,176 |
Other, Net | 1,314 | 508 |
Income Before Income Taxes | 50,434 | 44,684 |
Taxes Based on Income | 11,406 | 15,298 |
Net Income | $ 39,028 | $ 29,386 |
Net Income Per Common Share: | ||
Basic and diluted (in dollars per share) | $ 1.42 | $ 1.07 |
Cash Dividends Per Common Share (in dollars per share) | $ 0.60 | $ 0.55 |
Weighted Average Common Shares Outstanding: | ||
Basic (in shares) | 27,424 | 27,396 |
Diluted (in shares) | 27,514 | 27,451 |
Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net Income | $ 39,028 | $ 29,386 |
Defined Benefit Pension and Postretirement Benefit Plans: | ||
Amortization of loss, before tax | 103 | 134 |
Amortization of prior service credit, before tax | (46) | (45) |
Total Other Comprehensive Income, Before Tax | 57 | 89 |
Tax Attributes of Items in Other Comprehensive Income: | ||
Amortization of loss, tax | (24) | (49) |
Amortization of prior service credit, tax | 11 | 16 |
Total Tax Expense | (13) | (33) |
Other Comprehensive Income, Net of Tax | 44 | 56 |
Comprehensive Income | $ 39,072 | $ 29,442 |
Summary Of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Lancaster Colony Corporation and our wholly-owned subsidiaries, collectively referred to as “we,” “us,” “our,” “registrant” or the “Company” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and SEC Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our 2018 Annual Report on Form 10-K. Unless otherwise noted, the term “year” and references to a particular year pertain to our fiscal year, which begins on July 1 and ends on June 30; for example, 2019 refers to fiscal 2019, which is the period from July 1, 2018 to June 30, 2019. Subsequent Event On October 19, 2018, our wholly-owned subsidiary, T. Marzetti Company, acquired all the assets of Bantam Bagels, LLC (“Bantam Bagels”). Located in New York, New York, Bantam Bagels is a producer and marketer of frozen mini stuffed bagels and mini stuffed pancakes sold to both the retail and foodservice channels. In addition to the base purchase price of $34 million, which is subject to post-closing adjustments, the transaction also includes an additional earn-out payment that is tied to the future financial performance of the business. The acquisition was funded internally with cash on hand and is not significant to our financial position or results of operations. Given the date of the acquisition, the purchase accounting for the acquisition is incomplete. Property, Plant and Equipment Property, plant and equipment are recorded at cost, except for those acquired as part of a business combination, which are recorded at fair value at the time of purchase. We use the straight-line method of computing depreciation for financial reporting purposes based on the estimated useful lives of the corresponding assets. Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and the change in accounts payable in the Condensed Consolidated Statements of Cash Flows were as follows:
Earnings Per Share Earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock and common stock equivalents (restricted stock and stock-settled stock appreciation rights) outstanding during each period. Unvested shares of restricted stock granted to employees are considered participating securities since employees receive nonforfeitable dividends prior to vesting and, therefore, are included in the earnings allocation in computing EPS under the two-class method. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to common shareholders by the diluted weighted average number of common shares outstanding during the period, which includes the dilutive potential common shares associated with nonparticipating restricted stock and stock-settled stock appreciation rights. Basic and diluted net income per common share were calculated as follows:
Accumulated Other Comprehensive Loss The following table presents the amounts reclassified out of accumulated other comprehensive loss by component:
Significant Accounting Policies There were no changes to our Significant Accounting Policies from those disclosed in our 2018 Annual Report on Form 10-K. See expanded disclosure of revenue recognition policies in Note 2. Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance to require lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months and issued subsequent clarifications of this new guidance in 2018. This guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease). Both lease classifications require the lessee to record a right-of-use asset and a lease liability based upon the present value of the lease payments. Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset. Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the consolidated financial statements. The guidance will be effective for us in fiscal 2020, including interim periods. In July 2018, the FASB issued guidance that allows for an alternate transition method whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than restating comparative periods. We are currently evaluating the impact of this guidance. In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for fair value measurements. The guidance removes, modifies and adds disclosures related to fair value. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will be effective for us in fiscal 2021, including interim periods. As the guidance only relates to disclosures, there will be no impact on our financial position or results of operations. Recently Adopted Accounting Standards In May 2014, the FASB issued new accounting guidance for the recognition of revenue and issued subsequent clarifications of this new guidance in 2016 and 2017. The core principle of the new guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This model is based on a control approach. We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices currently employed by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal controls and disclosures using internal resources and the assistance of a qualified third party expert. We adopted the new guidance on July 1, 2018 using a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or results of operations. See additional revenue recognition disclosures in Note 2. In March 2017, the FASB issued new accounting guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost by disaggregating the service cost component from the other components of net periodic benefit cost. The amendments require an employer to present service cost in the same line item(s) as compensation costs for the pertinent employees whereas the other components of net periodic benefit cost must be reported separately from service cost and outside of income from operations. The amendments also allow only the service cost component to be eligible for capitalization. The amendments require retrospective application for the income statement presentation provisions and prospective application for the capitalization of the service cost component. However, as a result of prior years’ restructuring activities, we no longer have any active employees continuing to accrue service cost. Therefore, the service cost provisions are not applicable to us. We adopted the new guidance on July 1, 2018, and this adoption resulted in changes in classification on the income statement for all periods presented. The changes were not material. In August 2018, the FASB issued new accounting guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and postimplementation stages are expensed as the activities are performed. The guidance also requires such capitalized implementation costs to be expensed over the term of the hosting arrangement and advises on related presentation within the statement of financial position, the statement of income and statement of cash flows. The guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2019 on a prospective basis. The adoption resulted in a change in accounting principle, to capitalize certain costs instead of expensing them immediately. The costs capitalized under this new guidance were not material to our condensed consolidated financial statements. In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for defined benefit plans. The guidance removes, adds and clarifies disclosure requirements related to defined benefit pension or other postretirement plans. The guidance will be effective for fiscal years ending after December 15, 2020 and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2019. As the guidance only relates to disclosures, there was no impact on our financial position or results of operations. Changes to our annual disclosures for defined benefit pension plans will be included in our 2019 Annual Report on Form 10-K. |
Revenue Recognition |
3 Months Ended |
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Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition We adopted the new revenue recognition guidance on July 1, 2018 using a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or results of operations. We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices currently employed by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal controls and disclosures using internal resources and the assistance of a qualified third party expert. When Performance Obligations Are Satisfied A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The singular performance obligation of our customer contracts is determined by each individual purchase order and the respective food products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time. The performance obligations in our customer contracts are generally satisfied within 30 days. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of September 30, 2018. Significant Payment Terms In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, presently the majority of our payment terms are less than 60 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component. Shipping All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in our cost of sales; this includes shipping and handling costs incurred after control over a product has transferred to a customer, as we have chosen to use the available practical expedient to account for these costs within our cost of sales. Variable Consideration In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, returns, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience and any recent changes in the market. Warranties & Returns We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers. We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience. Contract Balances We do not have deferred revenue or unbilled receivable balances and thus do not have any related contract asset and liability balances as of September 30, 2018. Contract Costs We have identified sales commissions as an incremental cost incurred to obtain a customer contract. These costs are required to be capitalized under the new revenue recognition standard. We have chosen to use the available practical expedient to continue to expense these costs as incurred as the amortization period for such costs is one year or less. We do not incur significant fulfillment costs related to customer contracts which would require capitalization. Disaggregation of Revenue See Note 8 for disaggregation of our net sales by class of similar product and type of customer. |
Fair Value |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows: Level 1 – defined as observable inputs, such as quoted market prices in active markets. Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions. Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and equivalents, accounts receivable, accounts payable, contingent consideration payable and defined benefit pension plan assets. The estimated fair value of cash and equivalents, accounts receivable and accounts payable approximates their carrying value. Our contingent consideration, which is measured at fair value on a recurring basis, is included in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes our contingent consideration:
The contingent consideration resulted from the earn-out associated with our November 17, 2016 acquisition of Angelic Bakehouse, Inc. (“Angelic”). The purchase price did not include the future earn-out payment which is tied to performance-based conditions. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Angelic for fiscal 2021. The fair value of the contingent consideration was estimated using a present value approach, which incorporates factors such as business risks and projections, to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Using this valuation technique, the fair value of the contingent consideration was determined to be $13.9 million at November 17, 2016. The following table represents our Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration:
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Long-Term Debt |
3 Months Ended |
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Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt At September 30, 2018 and June 30, 2018, we had an unsecured credit facility (“Facility”) under which we could borrow, on a revolving credit basis, up to a maximum of $150 million at any one time, with potential to expand the total credit availability to $225 million subject to us obtaining consent of the issuing banks and certain other conditions. The Facility expires on April 8, 2021, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to LIBOR or an alternative base rate defined in the Facility, at our option. We must also pay facility fees that are tied to our then-applicable consolidated leverage ratio. Loans may be used for general corporate purposes. Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt. At September 30, 2018 and June 30, 2018, we had no borrowings outstanding under the Facility. At September 30, 2018 and June 30, 2018, we had $5.1 million of standby letters of credit outstanding, which reduced the amount available for borrowing on the Facility. We paid no interest for the three months ended September 30, 2018 and 2017. The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions. There are two principal financial covenants: an interest expense test that requires us to maintain an interest coverage ratio not less than 2.5 to 1 at the end of each fiscal quarter; and an indebtedness test that requires us to maintain a consolidated leverage ratio not greater than 3 to 1 at all times. The interest coverage ratio is calculated by dividing Consolidated EBIT by Consolidated Interest Expense, and the leverage ratio is calculated by dividing Consolidated Debt by Consolidated EBITDA. All financial terms used in the covenant calculations are defined more specifically in the Facility. |
Commitments And Contingencies |
3 Months Ended |
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Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | Commitments and Contingencies At September 30, 2018, we were a party to various claims and litigation matters arising in the ordinary course of business. Such matters did not have a material effect on the current-year results of operations and, in our opinion, their ultimate disposition will not have a material effect on our consolidated financial statements. With our acquisition of Angelic, we have a contingent liability recorded for the earn-out associated with the transaction. See further discussion in Note 3. |
Goodwill And Other Intangible Assets |
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Goodwill And Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill attributable to the Retail and Foodservice segments was $119.3 million and $48.7 million, respectively, at September 30, 2018 and June 30, 2018. The following table summarizes our identifiable other intangible assets:
Amortization expense for our other intangible assets, which is reflected in Selling, General and Administrative Expenses, was as follows:
Total annual amortization expense for each of the next five years is estimated to be as follows:
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Income Taxes |
3 Months Ended |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Tax Cuts and Jobs Act of 2017 (“Tax Act”) was signed into law on December 22, 2017 with an effective date of January 1, 2018. Most notably, the Tax Act reduced the statutory federal income tax rate for corporations from 35% to 21%. The statutory federal income tax rate for our 2019 tax return will be 21%. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017. SAB 118 allows for a measurement period in which companies can either use provisional estimates for changes resulting from the Tax Act or apply the tax laws that were in effect immediately prior to the Tax Act being enacted if estimates cannot be determined at the time of the preparation of the financial statements until the actual impacts can be determined. We recorded an initial estimate of the impact of the Tax Act within our December 31, 2017 financial statements, and the adjustments recorded in the second half of 2018 were not material. We will continue to evaluate the impacts of the Tax Act and record adjustments, as needed, resulting from the filing of our 2018 federal tax return, but we do not expect such adjustments to be material. Accrued federal income taxes of $5.7 million and accrued state and local income taxes of $0.4 million were included in Accrued Liabilities at September 30, 2018. Prepaid federal income taxes of $3.6 million and prepaid state and local income taxes of $0.9 million were included in Other Current Assets at June 30, 2018. |
Business Segment Information |
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Business Segment Information | Business Segment Information Our financial results are presented as two reportable segments: Retail and Foodservice. Costs that are directly attributable to either Retail or Foodservice are charged directly to the appropriate segment. Costs that are deemed to be indirect, excluding corporate expenses and other unusual significant transactions, are allocated to the two reportable segments using a reasonable methodology that is consistently applied. Retail - The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and distributors in the United States. We have placement of products in grocery produce departments through our refrigerated salad dressings, vegetable dips and fruit dips. Our flatbread products and sprouted grain bakery products are generally placed in the specialty bakery/deli section of the grocery store. We also have products typically marketed in the shelf-stable section of the grocery store, which include salad dressing, slaw dressing and croutons. Within the frozen food section of the grocery store, we have prominent market positions of frozen yeast rolls and garlic breads. Foodservice - The vast majority of the products we sell in the Foodservice segment are sold through sales personnel, food brokers and distributors in the United States. Most of the products we sell in the Foodservice segment are custom-formulated and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. The majority of our Foodservice sales are products sold under private label to restaurants. We also manufacture and sell various branded Foodservice products. Within our organization, our procurement, manufacturing, warehousing and distribution activities are substantially integrated across our operations in order to maximize efficiency and productivity, as many of our products are similar between the two segments. Consequently, we do not prepare, and our Chief Operating Decision Maker does not review, separate balance sheets for the reportable segments. As such, our external reporting does not include the presentation of identifiable assets by reportable segment. The composition of our identifiable assets at September 30, 2018 is generally consistent with that of June 30, 2018. We continue to evaluate our Retail and Foodservice segments based on net sales and operating income which follow:
The following table sets forth net sales disaggregated by class of similar products for the Retail and Foodservice segments:
The following table provides an additional disaggregation of Foodservice net sales by type of customer:
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Stock-Based Compensation |
3 Months Ended |
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Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation There have been no changes to our stock-based compensation plans from those disclosed in our 2018 Annual Report on Form 10-K. Our stock-settled stock appreciation rights (“SSSARs”) compensation expense was $0.7 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively. At September 30, 2018, there was $3.9 million of unrecognized compensation expense related to SSSARs that we will recognize over a weighted-average period of 2 years. Our restricted stock compensation expense was $0.8 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively. At September 30, 2018, there was $3.4 million of unrecognized compensation expense related to restricted stock that we will recognize over a weighted-average period of 2 years. |
Summary Of Significant Accounting Policies (Policy) |
3 Months Ended |
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Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis Of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Lancaster Colony Corporation and our wholly-owned subsidiaries, collectively referred to as “we,” “us,” “our,” “registrant” or the “Company” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and SEC Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our 2018 Annual Report on Form 10-K. Unless otherwise noted, the term “year” and references to a particular year pertain to our fiscal year, which begins on July 1 and ends on June 30; for example, 2019 refers to fiscal 2019, which is the period from July 1, 2018 to June 30, 2019. |
Property, Plant And Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost, except for those acquired as part of a business combination, which are recorded at fair value at the time of purchase. We use the straight-line method of computing depreciation for financial reporting purposes based on the estimated useful lives of the corresponding assets. |
Earnings Per Share | Earnings Per Share Earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock and common stock equivalents (restricted stock and stock-settled stock appreciation rights) outstanding during each period. Unvested shares of restricted stock granted to employees are considered participating securities since employees receive nonforfeitable dividends prior to vesting and, therefore, are included in the earnings allocation in computing EPS under the two-class method. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to common shareholders by the diluted weighted average number of common shares outstanding during the period, which includes the dilutive potential common shares associated with nonparticipating restricted stock and stock-settled stock appreciation rights. |
Recently Issued And Recently Adopted Accounting Standards | Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance to require lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months and issued subsequent clarifications of this new guidance in 2018. This guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease). Both lease classifications require the lessee to record a right-of-use asset and a lease liability based upon the present value of the lease payments. Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset. Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the consolidated financial statements. The guidance will be effective for us in fiscal 2020, including interim periods. In July 2018, the FASB issued guidance that allows for an alternate transition method whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than restating comparative periods. We are currently evaluating the impact of this guidance. In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for fair value measurements. The guidance removes, modifies and adds disclosures related to fair value. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will be effective for us in fiscal 2021, including interim periods. As the guidance only relates to disclosures, there will be no impact on our financial position or results of operations. Recently Adopted Accounting Standards In May 2014, the FASB issued new accounting guidance for the recognition of revenue and issued subsequent clarifications of this new guidance in 2016 and 2017. The core principle of the new guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This model is based on a control approach. We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices currently employed by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal controls and disclosures using internal resources and the assistance of a qualified third party expert. We adopted the new guidance on July 1, 2018 using a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or results of operations. See additional revenue recognition disclosures in Note 2. In March 2017, the FASB issued new accounting guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost by disaggregating the service cost component from the other components of net periodic benefit cost. The amendments require an employer to present service cost in the same line item(s) as compensation costs for the pertinent employees whereas the other components of net periodic benefit cost must be reported separately from service cost and outside of income from operations. The amendments also allow only the service cost component to be eligible for capitalization. The amendments require retrospective application for the income statement presentation provisions and prospective application for the capitalization of the service cost component. However, as a result of prior years’ restructuring activities, we no longer have any active employees continuing to accrue service cost. Therefore, the service cost provisions are not applicable to us. We adopted the new guidance on July 1, 2018, and this adoption resulted in changes in classification on the income statement for all periods presented. The changes were not material. In August 2018, the FASB issued new accounting guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and postimplementation stages are expensed as the activities are performed. The guidance also requires such capitalized implementation costs to be expensed over the term of the hosting arrangement and advises on related presentation within the statement of financial position, the statement of income and statement of cash flows. The guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2019 on a prospective basis. The adoption resulted in a change in accounting principle, to capitalize certain costs instead of expensing them immediately. The costs capitalized under this new guidance were not material to our condensed consolidated financial statements. In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for defined benefit plans. The guidance removes, adds and clarifies disclosure requirements related to defined benefit pension or other postretirement plans. The guidance will be effective for fiscal years ending after December 15, 2020 and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2019. As the guidance only relates to disclosures, there was no impact on our financial position or results of operations. Changes to our annual disclosures for defined benefit pension plans will be included in our 2019 Annual Report on Form 10-K. |
Revenue Recognition (Policy) |
3 Months Ended |
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Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | When Performance Obligations Are Satisfied A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The singular performance obligation of our customer contracts is determined by each individual purchase order and the respective food products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time. The performance obligations in our customer contracts are generally satisfied within 30 days. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of September 30, 2018. Significant Payment Terms In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, presently the majority of our payment terms are less than 60 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component. Shipping All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in our cost of sales; this includes shipping and handling costs incurred after control over a product has transferred to a customer, as we have chosen to use the available practical expedient to account for these costs within our cost of sales. Variable Consideration In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, returns, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience and any recent changes in the market. Warranties & Returns We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers. We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience. Contract Balances We do not have deferred revenue or unbilled receivable balances and thus do not have any related contract asset and liability balances as of September 30, 2018. Contract Costs We have identified sales commissions as an incremental cost incurred to obtain a customer contract. These costs are required to be capitalized under the new revenue recognition standard. We have chosen to use the available practical expedient to continue to expense these costs as incurred as the amortization period for such costs is one year or less. We do not incur significant fulfillment costs related to customer contracts which would require capitalization. |
Summary Of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Construction In Progress In Accounts Payable | Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and the change in accounts payable in the Condensed Consolidated Statements of Cash Flows were as follows:
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Schedule Of Basic And Diluted Net Income Per Common Share Calculations | Basic and diluted net income per common share were calculated as follows:
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Schedule Of Amounts Reclassified Out Of Accumulated Other Comprehensive Loss | The following table presents the amounts reclassified out of accumulated other comprehensive loss by component:
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Fair Value (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Acquisition-Related Contingent Consideration Measured At Fair Value On A Recurring Basis | Our contingent consideration, which is measured at fair value on a recurring basis, is included in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes our contingent consideration:
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Schedule Of Level 3 Fair Value Measurements Using Significant Other Unobservable Inputs For Acquisition-Related Contingent Consideration | The following table represents our Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration:
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Goodwill And Other Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Other Intangible Assets | The following table summarizes our identifiable other intangible assets:
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Schedule Of Amortization Expense | Amortization expense for our other intangible assets, which is reflected in Selling, General and Administrative Expenses, was as follows:
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Estimated Annual Amortization Expense | Total annual amortization expense for each of the next five years is estimated to be as follows:
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Business Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Financial Information Attributable To Reportable Segments | We continue to evaluate our Retail and Foodservice segments based on net sales and operating income which follow:
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Disaggregation Of Net Sales By Class Of Similar Products | The following table sets forth net sales disaggregated by class of similar products for the Retail and Foodservice segments:
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Disaggregation Of Foodservice Net Sales By Type Of Customer | The following table provides an additional disaggregation of Foodservice net sales by type of customer:
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Summary Of Significant Accounting Policies (Narrative) (Details) $ in Millions |
Oct. 19, 2018
USD ($)
|
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Subsequent Event [Member] | Bantam Bagels [Member] | |
Subsequent Event [Line Items] | |
Base purchase price | $ 34 |
Summary Of Significant Accounting Policies (Schedule Of Construction In Progress In Accounts Payable) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Accounting Policies [Abstract] | ||
Construction in progress in Accounts Payable | $ 3,219 | $ 590 |
Summary Of Significant Accounting Policies (Schedule Of Basic And Diluted Net Income Per Common Share Calculations) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
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Accounting Policies [Abstract] | ||
Net income | $ 39,028 | $ 29,386 |
Net income available to participating securities | (82) | (47) |
Net income available to common shareholders | $ 38,946 | $ 29,339 |
Weighted average common shares outstanding - basic (in shares) | 27,424 | 27,396 |
Incremental share effect from: | ||
Nonparticipating restricted stock (in shares) | 5 | 4 |
Stock-settled stock appreciation rights (in shares) | 85 | 51 |
Weighted average common shares outstanding - diluted (in shares) | 27,514 | 27,451 |
Net income per common share - basic and diluted (in dollars per share) | $ 1.42 | $ 1.07 |
Summary Of Significant Accounting Policies (Schedule Of Amounts Reclassified Out Of Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
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Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Accumulated other comprehensive loss at beginning of period | $ (8,259) | $ (8,936) |
Total other comprehensive income, before tax | 57 | 89 |
Total tax expense | (13) | (33) |
Other comprehensive income, net of tax | 44 | 56 |
Accumulated other comprehensive loss at end of period | (8,215) | (8,880) |
Defined Benefit Pension Plan [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Amortization of unrecognized net (gain) loss | 112 | 143 |
Postretirement Benefit Plan [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Amortization of unrecognized net (gain) loss | (9) | (9) |
Amortization of prior service credit | $ (46) | $ (45) |
Fair Value (Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
Nov. 17, 2016 |
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Angelic [Member] | |||
Business Acquisition [Line Items] | |||
Fair value of contingent consideration | $ 17,080 | $ 17,080 | $ 13,900 |
Fair Value (Schedule Of Acquisition-Related Contingent Consideration Measured At Fair Value On A Recurring Basis) (Details) - Angelic [Member] - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
Nov. 17, 2016 |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Acquisition-related contingent consideration | $ 17,080 | $ 17,080 | $ 13,900 |
Level 1 [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Acquisition-related contingent consideration | 0 | 0 | |
Level 2 [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Acquisition-related contingent consideration | 0 | 0 | |
Level 3 [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Acquisition-related contingent consideration | $ 17,080 | $ 17,080 |
Fair Value (Schedule Of Level 3 Fair Value Measurements Using Significant Other Unobservable Inputs For Acquisition-Related Contingent Consideration) (Details) - Angelic [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Business Acquisition [Line Items] | ||
Acquisition-related contingent consideration at beginning of period | $ 17,080 | $ 15,028 |
Additions | 0 | 0 |
Changes in fair value included in Selling, General and Administrative Expenses | 0 | 488 |
Acquisition-related contingent consideration at end of period | $ 17,080 | $ 15,516 |
Long-Term Debt (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Jun. 30, 2018 |
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Debt Disclosure [Abstract] | |||
Maximum borrowing capacity | $ 150,000,000 | $ 150,000,000 | |
Maximum borrowing capacity on obtaining consent of the issuing bank | $ 225,000,000 | 225,000,000 | |
Line of credit facility, expiration date | Apr. 08, 2021 | ||
Line of credit facility, amount outstanding | $ 0 | 0 | |
Standby letters of credit, amount outstanding | 5,100,000 | $ 5,100,000 | |
Interest paid | $ 0 | $ 0 | |
Minimum interest coverage ratio | 250.00% | ||
Maximum leverage ratio | 300.00% |
Goodwill And Other Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
---|---|---|
Goodwill [Line Items] | ||
Goodwill | $ 168,030 | $ 168,030 |
Retail [Member] | ||
Goodwill [Line Items] | ||
Goodwill | 119,300 | 119,300 |
Foodservice [Member] | ||
Goodwill [Line Items] | ||
Goodwill | $ 48,700 | $ 48,700 |
Goodwill And Other Intangible Assets (Schedule Of Amortization Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 965 | $ 967 |
Goodwill And Other Intangible Assets (Estimated Annual Amortization Expense) (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
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Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 | $ 3,823 |
2021 | 3,738 |
2022 | 3,664 |
2023 | 3,105 |
2024 | $ 3,105 |
Income Taxes (Narrative) (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2017 |
Sep. 30, 2018 |
Jun. 30, 2018 |
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Income Tax Authority [Line Items] | ||||
Federal statutory income tax rate | 35.00% | |||
Federal [Member] | ||||
Income Tax Authority [Line Items] | ||||
Accrued income taxes | $ 5.7 | |||
Prepaid income taxes | $ 3.6 | |||
State and Local [Member] | ||||
Income Tax Authority [Line Items] | ||||
Accrued income taxes | $ 0.4 | |||
Prepaid income taxes | $ 0.9 | |||
Scenario, Forecast [Member] | ||||
Income Tax Authority [Line Items] | ||||
Federal statutory income tax rate | 21.00% |
Business Segment Information (Summary Of Financial Information Attributable To Reportable Segments) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Segment Reporting Information [Line Items] | ||
Net Sales | $ 316,654 | $ 298,916 |
Operating Income | 49,120 | 44,176 |
Retail [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 162,748 | 162,144 |
Operating Income | 33,948 | 32,869 |
Foodservice [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 153,906 | 136,772 |
Operating Income | 18,861 | 14,690 |
Corporate [Member] | ||
Segment Reporting Information [Line Items] | ||
Operating Income | $ (3,689) | $ (3,383) |
Business Segment Information (Disaggregation Of Foodservice Net Sales By Type Of Customer) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||
Total net sales | $ 316,654 | $ 298,916 |
Foodservice [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total net sales | 153,906 | 136,772 |
Foodservice [Member] | National accounts [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total net sales | 115,575 | 100,412 |
Foodservice [Member] | Branded and other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total net sales | $ 38,331 | $ 36,360 |
Stock-Based Compensation (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Stock Settled Stock Appreciation Rights SARS [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 0.7 | $ 0.6 |
Unrecognized compensation expense | $ 3.9 | |
Weighted-average period over which remaining compensation expense will be recognized (in years) | 2 years | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 0.8 | $ 0.6 |
Unrecognized compensation expense | $ 3.4 | |
Weighted-average period over which remaining compensation expense will be recognized (in years) | 2 years |
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