Lancaster Colony Corporation

Good morning. My name is Rocco, 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 2023 first quarter conference call. Conducting today's call will be Dave Sosinski, President and CEO, and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise. After the speakers have completed their prepared remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad, and questions will be taken in the order that they are received. If you would like to withdraw your question, please press star, then two. Thank you. And now to begin the conference call, here is Gail Ganopsic, Vice President of Corporate Finance and Investor Relations for Lancaster Colony Corporation.

Thank you. Good morning, everyone, and thank you for joining us today for Lancaster Colony's fiscal year 2023 first quarter conference call. 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 our company's website, LancasterColony.com, later this afternoon. For today's call, Dave Suszynski, our President and CEO, will begin with a business update and highlights for the quarter. Tom Piggott, our CFO, will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions. Once again, we appreciate your participation this morning. I'll now turn the call over to Lancaster Colony's President and CEO, Dave Sosinski. Dave?

Thanks, Dale, and good morning, everyone. It's a pleasure to be here with you today as we review our first quarter results for fiscal year 2023. In our first quarter, which ended September 30th, we were very pleased to report both record sales and higher profits. Consolidated net sales increased 8.5% to $426 million, while consolidated gross profit improved 7.2% to $99.1 million. As we foreshadowed on our Q4 call, our sales for the quarter were unfavorably impacted by our July 1st ERP go-live, which shifted an estimated 25 million of net sales into our fiscal fourth quarter. The retail segment's first quarter net sales of 223 million were flat versus prior year and compared a strong growth of nearly 16% in the same period a year ago. Advance ordering ahead of our ERP go-live accounted for an estimated 11 million in retail net sales that were shifted into our fiscal fourth quarter. Top-performing product lines in the first quarter included Marsetti refrigerated dressings and caramel dips. During the period, we also added to our growing licensing program with the launch of a new, larger size of popular Chick-fil-A sauce and the exciting new launch of Arby's sauce and their iconic horsey sauce. Retail net sales reflect the benefit of pricing actions taken to offset inflationary costs, including our most recent round of pricing for retail dressings and sauces which took effect in early August. Sales volumes measured in pound shift were down 15% as impacted by three primary factors. First, our decision to exit some less profitable product lines during fiscal year 2022. Second, the advance ordering ahead of our ERP go live. And third, demand elasticity attributed to inflationary pricing. Excluding the product line rationalizations and advance ordering, retail sales volume declined about 7%, which was in line with our expectations for demand elasticity. IRI data for our first quarter showed share gains for Sister Schubert's dinner rolls and Marzetti refrigerated dressings. Sister Schubert's share of the frozen dinner roll category increased 290 basis points to 53.9%. and Marsetti's shared refrigerated dressings category added 190 basis points to 23.8%. In summary, Q1 top-line results for our retail segment reflect our pricing actions, strong performance from our Marsetti brand, and additions to our licensing program, which were offset by product line rationalizations, demand elasticity, and advanced ordering ahead of our July 1st ERP go-live. In our food service segment, net sales grew over 20%, driven by our pricing actions, along with volume gains for select customers in our mix of national accounts. Advance ordering ahead of our July 1st ERP Go Live accounted for an estimated $14 million in food service net sales that were pulled forward into our fiscal fourth quarter ended June 30th. Excluding the advance ordering, our food service segment volumes were down 1% in fiscal Q1, which compares favorably to NPD crest data for the quarter, which showed restaurant industry transactions were down in the low to mid-single-digit percentage point range for the period. During Q1, we continued to experience high levels of inflation for raw materials, packaging, and freight. That said, we've made great progress through our pricing actions where our PNOC, or pricing net of commodities, was favorable versus the prior year, as we've begun to recover some of the unfavorable inflationary cost impact we experienced last year. This progress is reflected in our Q1 gross margin, which reached 23.3%, a sequential improvement of 150 basis points versus our fiscal fourth quarter. We will continue to focus upon improving our financial performance through productivity gains in our supply chain and revenue growth management. My sincere thanks to the entire team here at Lancaster Economy for their tremendous efforts this quarter and their contributions to our improved financial performance. I'll now turn the call over to Tom Piggott, our CFO, for his commentary on our first quarter results.