Columbus, Ohio-based Lancaster Colony Corporation has reported that a loss provision of US$8.8m, for accounts receivable reserves related to Kmart Corporation’s bankruptcy filing, has significantly affected net earnings for its Q2 ended 31 December 2001.
For the corresponding quarter a year ago, the company reported net income down 42% to US$29,853,000. Basic and diluted earnings per share were 47 cents, compared to 79 cents in fiscal 2001.
Net sales were flat at US$312m compared to US$311m in the Q2 last year.
On an after-tax basis, the reserve provision related to Kmart totaled approximately 24 cents per share. Excluding the Kmart item, basic and diluted earnings per share were 71 cents.
For the six months, net income reached YS$37,764,000, after the provision for receivables reserves, compared to year-ago earnings of US$50,102,000 which included an after-tax charge of US$998,000 or three cents per share for the cumulative effect of an accounting change. Basic and diluted earnings per share for the period were US$1.02 compared to US$1.33 a year ago. Net sales were US$577m versus US$572m in the first half last year.
Chairman and CEO John B. Gerlach, Jr, said: “The impact of Kmart’s bankruptcy filing was significant and disappointing, but we are supportive of Kmart’s ongoing efforts to complete its reorganization and emerge as a more viable retailer.
“Otherwise, we were pleased with improved operating results in our Automotive segment and solid volume growth in Specialty Foods. Our bottom line performance was constrained by unsettled consumer demand and very competitive market conditions.”
Specialty Foods sales grew 11% for the Q2 but operating income declined almost 7%, Gerlach said: “While this segment was up against a strong quarter a year ago,sales volumes increased nicely, led by our frozen bread and foodservice product lines. Increased promotional activities, higher dairy costs and a less favorable product mix affected this segment’s margins. We are optimistic that dairy costs will return to more normal levels in the third quarter.”
Looking ahead, Gerlach said: “Near term, we are optimistic that the positives of the Automotive segment will continue and that Specialty Foods operating results will become more favorable.
“Our candle operations anticipate receiving, under recently enacted US fair trade legislation, a previously announced US$15m payment which will be treated as other income in our Q3 financial statements.
“Our outlook for nonfood segments remains tempered by highly competitive and uncertain market conditions, including candle imports. Our third quarter Glassware and Candles results have a tough comparison as the year-ago quarter benefited from large pipeline fills of new candle programs.”