Lancaster Colony Q3 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

There are 7 speakers on the call.

Operator

Morning. My name is Carmen, 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 Third 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.

Operator

After the speakers have completed their prepared remarks, there will be a question and answer period. Thank you. And now to begin the conference call, here is Del Ganepsi, Vice President of Corporate Finance and Investor Relations for Lancaster Colony Corporation.

Speaker 1

Good morning, everyone, and thank you for joining us today for Lancaster Colony's fiscal year 2023 Q3 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. To the call. 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.

Speaker 1

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 Ciesinski, our President and CEO, will begin with the business update and highlights for the quarter. Tom Figgott, our CFO, will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook.

Speaker 1

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

Speaker 2

the call over to Lancaster Colony's President and CEO, Dave Ciesinski. Dave? Thanks, Dale, and good morning, everyone. It's a pleasure to be here with you today as we review our Q3 results for fiscal year 2023. In our fiscal Q3, which ended March 31, We were pleased to report both record sales and higher profits.

Speaker 2

Consolidated net sales increased 15.2% to $465,000,000 while consolidated gross profit improved 37.9 percent to $94,200,000 Operating income reached $29,400,000 compared to an operating loss of $7,600,000 last year. Prior year operating income included a restructuring and impairment charge of 22,700,000 The Retail segment reported Q3 net sales of $247,000,000 up 16%, driven by the favorable impact of pricing actions to offset inflation and strong volume growth of 6%. The volume growth measured in pound shift was driven by the continued success of our licensing program and double digit growth for our New York bakery frozen garlic to Fred Products. In licensing, Buffalo Wild Wing sauces, Arby sauces, Chick Fil A sauces and Olive Garden dressings all contributed to volume growth. IRI data for our fiscal Q3 showed sales gains for marquee retail brands and notable share to our category leading New York Bakery and Sister Schubert brands.

Speaker 2

New York Bakery's leading share of the frozen garlic bread category grew 3 50 basis points to 43.5 percent. And Sister Schubert's leading share of the frozen dinner roll category increased to 50 basis points to 53.1 percent. In our Foodservice segment, net sales grew over 14% to to $218,000,000 driven by pricing actions, volume gains for several national account customers and higher demand for our branded foodservice products. In total, Foodservice segment volume increased less than 1%. Excluding the sales of some less profitable product to the lines that were discontinued during the past year, foodservice volume was up over 4%.

Speaker 2

During Q3, we continued to experience to high levels of inflation for raw materials and packaging. That said, through the benefit of our pricing actions, PNOC or pricing net of commodities was favorable versus the prior year. This is a continuation of the trend that began in Q1 of this year in which we were recovering some of the negative PNOC we experienced last year. We also benefited from another quarter to the Q1 of 2019. In the quarters ahead, we will maintain our focus on supply chain productivity, value engineering and revenue management to improve our financial performance.

Speaker 2

Before I turn it over to Tom, I'd like to extend my sincere thanks to the entire Lancaster Colony team for their ongoing commitment and contributions to our improved operational and financial performance. I'll now turn the call over to Tom Pigott, our CFO, for his commentary on our Q3 results. To Tom? Thanks, Dave. Overall, the results for

Speaker 3

the quarter reflected continued top and bottom line growth driven by pricing actions that offset inflationary costs, improved supply chain performance and strong volume growth versus the prior year quarter. 3rd quarter net sales increased by 15.2 percent to $464,900,000 This growth was driven by pricing and volume. Decompromising the 15.2% increase in revenue, to the call. 11.3 percentage points were driven by pricing, with the remaining 3.9 percentage points driven by volume and a more favorable sales mix. Consolidated gross profit increased by $25,900,000 or 37.9 percent to $94,200,000 The increase in gross profit reflected favorable PNOC, to improve supply chain performance and higher volume.

Speaker 3

If you recall in Q3 of fiscal 2022, we had negative PNOC as we lag the rapid run up in costs. We continue to recover those losses. While our commodity inflation was approximately 20% this quarter, Our pricing actions offset this increase and the prior year shortfall. As it relates to the improved supply chain performance, in the prior year quarter, we experienced a high level of supply chain disruption resulting in higher costs. This quarter, execution improved and the company generated cost savings that contributed to the improved gross profit performance.

Speaker 3

Finally, both segments reported volume growth despite the impact of the product discontinuations. Selling, general and administrative expenses increased to 18.9 percent or $10,300,000 The increase reflects higher incentive compensation, to investments to support the growth of the business and charges resulting from the settlement of lawsuits. The investments to support the growth of the business to the call. Including higher consumer spending and increased brokerage costs. Consumer spending is increasing in the second half to drive volume growth as our product supply position has improved.

Speaker 3

Expenditures for Project Ascent, our ERP initiative, were down as the project progressed into its later

Speaker 2

to Stages.

Speaker 3

Costs related to the project totaled $7,600,000 in the current year quarter versus $10,300,000 in the prior year quarter. Consolidated operating income increased $37,000,000 to $29,400,000 in the prior year quarter, we recorded non cash restructuring impairment charges and a benefit for changes in contingent consideration. Together, They netted to a $21,400,000 expense. Excluding these items, operating income increased due to strong gross profit to the growth of the business partially offset by the higher SG and A costs. Our tax rate for the quarter was 18.2% versus 40.2% in the prior year quarter.

Speaker 3

We estimate our tax rate for the Q4 to be 23%. To

Speaker 4

the Q3.

Speaker 3

3rd quarter diluted earnings per share increased $1.06 to $0.89 The increase was primarily driven by the 2 non cash charges in the prior year that I mentioned, which totaled $0.59 and the improvement in the underlying performance of the business. To the next question. The reduction in project ascent expenses contributed $0.08 to the EPS growth versus the prior year quarter. With regard to capital expenditures, payments for property additions in the Q3 totaled $22,400,000 for fiscal year 2023, we are forecasting total capital expenditures of approximately $100,000,000 This forecast includes approximately $55,000,000 for the completion of the Horse Cave expansion project. In addition to investing in our business, we also returned funds to shareholders.

Speaker 3

Our quarterly cash dividend of $0.85 per share paid on March 31, represented a 6% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at 60 years. Our financial position remains strong as we are debt free with $82,900,000 of cash on the balance sheet. So to wrap up my commentary, our 3rd quarter results to reflect improved performance in several areas, resulting in very strong profit growth. I'll now turn it back over to Dave for his closing remarks.

Speaker 3

Thank you.

Speaker 2

To. Thanks, Tom. As we look ahead, Lancaster Colony will continue to leverage the combined strength of our team, to our operating strategy and our balance sheet in support of the 3 simple pillars of our growth plan: to 1, accelerate core business growth to simplify our supply chain to reduce our cost and grow our margins and 3, to expand our core with focused M and A and strategic licensing. In our fiscal Q4, we anticipate retail sales to benefit from our licensing program, incremental growth from new products, to the flavors and sizes that we introduced this fiscal year. And in foodservice, we expect continued volume growth from several of our national chain restaurant customers.

Speaker 2

It's worth noting that our consolidated net sales will compare to last year's Q4 that benefited from an estimated $25,000,000 in to the advanced customer orders ahead of our July 1 ERP go live date for Wave 1. Cost inflation will remain a headwind to our financial results, but we expect our pricing actions and cost savings initiatives to offset the increased cost. Finally, I'd like to provide you with an update on the implementation phase of our ERP initiative, Project Ascent. To the call. As we shared previously, this past July, we successfully completed Wave 1 of the implementation and in October, we completed Wave 2.

Speaker 2

During our fiscal Q3, we successfully completed Wave 3 of the implementation, adding our largest to Dressing and Sauce production facility in Horse Cave, Kentucky to the new system. The implementation went as planned, But as expected, we did incur some incremental cost as production and service were unfavorably impacted by the ERP system cutover process. I'm happy to report that the team has successfully addressed those issues. We expect to complete to the final waves of Project Ascent in the coming months with the implementation phase scheduled to conclude during our fiscal Q1. I'd like to extend my sincere thanks to all of my teammates for their ongoing efforts on this important strategic initiative.

Speaker 2

This concludes our prepared remarks for today, and we'd be happy to answer any questions you might have.

Operator

Thank you.

Speaker 5

And

Operator

it comes from the line of Todd Brooks with The Benchmark Company. Please go ahead.

Speaker 4

Hey, thanks. Good morning, everybody.

Speaker 5

Good morning. Good morning.

Speaker 4

Couple of questions for you, if I may. 1, can we dive into the SG and A spend a little bit? I'd love to get some Color going forward, maybe what the legal charges that were in that total and then to talk about maybe the higher level of customer spending that was expected in the back half of the year, if that was either outside versus prior expectations or if we just were too conservative in our modeling of G and A.

Speaker 3

Okay. Hi, Todd. So I'll take you through that. So as we in the quarter, the incentive compensation Increase year over year was $4,000,000 And really what we had is a case where last year, on the financial performance of the business was below the overall company's expectations in this year, it's exceeding. So that $4,000,000 is more of a transitory item that is kind of a catch up for the first half of the year as well as the Q3.

Speaker 3

The legal settlements related to closed businesses and that was $2,000,000 So that $6,000,000 is more transitory in nature. Then when you get into the next bucket, you're really we're really talking about the things that are invest to grow. The consumer spending was up to the call. $1,000,000 and the brokerage was up a couple of $1,000,000 And then the last driver I'll touch on is really the SAP costs in the core business, and that's the amortization and the licensing costs from going live on the new software. So Those are the key items I want to hit on.

Speaker 3

In terms of the outlook for Q4, we're going to continue to invest to grow to support the business. So We do expect the consumer spend to be sequentially higher than last year as their supply position has improved and we continue to want to drive volume growth and we'll continue to spend on Ascent. Some of those transitory costs, particularly the legal and some of the bonus Won't be repeating. So sequentially, we do expect the overall spend to decline in the Q4.

Speaker 4

Perfect. That's really helpful. Thanks, Tom. And then my final question, I'll jump back in queue. And this is just trying to level set everybody.

Speaker 4

So Dave, you teased out the 25,000,000 that we're up against in this quarter. That was a pull forward, but you also talked in the release about some potential to pull forward into the March quarter from just Easter timing and the Easter shift. Is there an impact that we need to think about as we're thinking about the retail segment Based on that timing, maybe what type of revenue do

Speaker 2

you estimate was pulled forward into the market? Yes. So maybe First, Todd, I'll start just talking about Q3 and then maybe we'll talk about the outlook for to Q4. For Q3, Easter was a contributor, but it was really a more modest contributor. The bigger driver in the swing on volume was to shipments behind new items that we're launching.

Speaker 2

So in particular, sort of a range of those sauce items that have gone out, the larger size of Chick to the company's full year results. And the other driver on volume has been just the strength of the Buffalo Wild Wings proposition as we've been able to bring online incremental capacity as we've had some of the viral marketing that's Taking place, we've seen that business continue to run. As we look forward in Q4, I think it's important for you and for the others to continue to track. We did have that $25,000,000 pull forward last year. Dollars 10,000,000 of that was in retail, dollars 15,000,000 of that was in foodservice.

Speaker 2

Importantly, as we think about what the volume outlook might be like for the consolidated business, we continue to see a pathway to modest overall volume growth for the business in Q4. If you then screw in a little bit tighter and you look at the retail business, we see line of sight there probably to possibly on an organic basis as much as midtomidsingledigit volume growth on that business. So we continue to feel good about it.

Speaker 4

That's really helpful. Thanks, Dave. I'll jump back in queue.

Operator

Thank you. One moment for our next question, please. And it comes from the line of Andrew Wolf with CL King. Please proceed.

Speaker 5

Hi, thanks and also good morning.

Speaker 2

Good morning, Marty. Can I ask

Speaker 5

on Kind of the state of trade relations kind of an over open ended question a bit? Just the retailers, Most of the supermarket chains or certainly the sectors having negative volumes. It's not Horrible elasticities, but it seems like all this pricing has caught up to the trade a bit. Some Brands are losing share to private label, some of yours were, now they're not. What is the state of play overall with price increases into saying, hey, we need another round of increases to retailer X, Y and Z.

Speaker 5

And second, what is the state of play with them asking for ramped up promotions? I see you talked about your customer side, which goes through G and A, but more than net sales one, which goes into the retail trade. They're asking for more of that as well.

Speaker 2

So Andrew, maybe I'll start by talking about I'll start with retail about those conversations at the highest level. And I would characterize them as continuing to be very constructive. The last thing we want to do is go in and talk just about pricing to our customers. And the unfortunate reality is in the last couple of years because of the rate of inflation we've had, we've had a lot of conversations about pricing. We've been able to counter those conversations by always being able to talk about new item launches and other things that we're doing with them to drive to outsized growth.

Speaker 2

So I think as I think about the disposition of our relationship with our retailers, I would put them in a very constructive category because we're in there talking about not just pricing, but a lot about volumetric growth and category growth ideas. I don't know if that's necessarily the case for all of our peers, but I can tell you that's sort of where we stand today. As far as pricing is concerned, We have had some tough conversations, and we continue to price through the first half of the year. We haven't taken any pricing since the last to the next time that we've talked, our retail business remains PNOC positive. And to the good to which we need to go back into the marketplace and have conversations around pricing, we fully expect those conversations to be a whole lot more tough than they were in, let's say, the last 18 months.

Speaker 2

So Now your other question is what can we expect to see on the trade front? And what I would tell you is to date we have not been getting lots to the consumer and commodity categories that have seen a more aggressive fall or in areas where private label is more developed and the retailer feels like they have more leverage to try to bring that money back into the category. That really, knock on wood here, it is not our current circumstances. And again, Retailers always want to talk about, 1st and foremost, what we can do with them to drive category growth and the growth of their baskets. And That's the lever that we're really working to drive the hardest.

Speaker 2

And maybe I'll even talk about the below the line marketing spin Because areas where we're spending tends to be more focused in partnering with our retailers to drive the growth of basket spending than it is necessarily in some of the, let's just call it equity advertising areas. So I would say end to end, we're working with them to figure out how we innovate to grow their business, how we market to grow their business, so the relationships on the retail side continue to be very collaborative. On the foodservice side, I think we've shared with you over the years, Andrew, that we have a very open and transparent relationship with our foodservice operators, particularly in national accounts around commodity spend. We work with them to take positions on these core commodities. So again, they know exactly what our situation is on commodities and we work with them.

Speaker 2

They tell us oftentimes when they want to take a position, how far they want to tow and everything else.

Speaker 5

Thank you. Appreciate that. A quick follow-up just on the foodservice side. You've been kind of rationalizing some either items or contracts that were low margin. And I think you said it was about a 4% volume impact.

Speaker 5

When does that cycle

Speaker 2

We're really cycling through the end of that. You'll see a little bit of an impact in Q4 and then it will have essentially run its course. The foodservice team beyond rationalizing customers has done a tremendous job of rationalizing SKUs. And that's been a really important contributor to their ability to improve their margins overall. I mean, it's I mean, we're talking strong double digit decreases in items that are helping us simplify that business to create better operating leverage.

Speaker 2

They deserve a lot of credit in that space.

Speaker 5

Great. Thank you.

Speaker 1

Thanks, Andrew.

Speaker 2

Thanks, Andrew.

Speaker 4

Thank you.

Operator

Thank you. One moment for our next question, please. And it comes from the line of Conor Ratigan with Consumer Edge. Please proceed.

Speaker 6

Hey guys, good morning. Thanks for the question.

Speaker 5

Hi, Connor. Hi, Connor.

Speaker 6

Yes. So obviously, a really strong top line quarter top line this quarter. Congrats, guys. And I was just wondering, maybe could

Speaker 3

you help us sort of understand the

Speaker 6

drivers here a little bit better? So obviously, the license portfolio was Crucial, but I'm just wondering maybe how much of that 6% retail volume growth was due to Arby's, just given that you're comping a pre launch And also on the foodservice side, is that increased demand that you guys called out just incremental placements or higher consumption at existing locations?

Speaker 2

Sure. So the Arby's contribution was a little less than 20% to that. So it was a notable contributor and we to continue to be excited about how that proposition is performing. We also saw Buffalo Wild Wings was a strong contributor to that. Chick Fil A was a strong contributor to that as well.

Speaker 2

And our own brand in this case, New York Texas Toast was a strong contributor as well. The supply chain team has done a really nice job continuing to figure out how to ring out incremental capacity and our selling and marketing organization has done a nice job of continuing to sell that. I think overall that brand continues to be to a really nice story where whether you're looking at the 1 year or even the 2 year stack, you're looking at a business that's up between 20% and almost 25% on the sales line and we're also seeing it behind volume growth as I noted here.

Speaker 6

No, that's great. Really helpful, guys. And then also on the cost side as well. So I know you've been trending at around 20% inflation for a while. Unless I missed it, do you guys have a 3Q inflation figure you can share?

Speaker 6

And also sort of around the commentary with I guess, we expect a year over year margin

Speaker 3

Thanks for the question. The Q3 inflationary impact was about 20%, and it does begin to moderate A bit in Q4 when we look at the natural dilution from higher prices and higher commodities, we're looking at more of 150 basis point impact year over year. But then as you look at the offsets, we get a better contribution from the cost savings initiatives, to value engineering. We've talked about improved sales mix and the discontinuations Dave mentioned in sourcing. All of that will help us mitigate that natural dilution we get in Q4.

Speaker 3

So, we're looking at kind of a consistent Gross margin percentage versus the prior year in Q4.

Speaker 2

And then beyond that, we haven't given specific guidance on the outlook, but I think what I would share with you is, as you might expect, it is moderating. We're seeing oil moderate. We're seeing Some of the other categories moderate like eggs, particularly more recently, but they're being offset by other categories that are continuing to run, particularly sweeteners. So we'll have more to share with you on that as we come out with our Q4 results.

Speaker 6

Okay, perfect. And I'll just squeeze one more quick one in here. So, Jeff, please. Yes, in the track data that we see, it really looks like RV is Following that initial rollout track similar to Chick Fil A. So I guess just how happy are you guys meeting with the rollout to date?

Speaker 6

And is Is it just roughly in line with your expectations or maybe running slightly ahead?

Speaker 2

I would say it's in line with our expectations. What we've learned with every one of these, Connor, is that it just takes time for our retail partners to get them cut into the shelf, to get the right number of facings on the shelf for consumers to become aware and for the items to turn. And that is very, very true with the Arby's to the position. And it's I mean across the longer arc of time, I think it's true with Buffalo Wild Wings, what you ordinarily see when you come out with A brand like this that let's say has awareness because of the restaurant, but doesn't necessarily have retail trial is retailers initially cut it in wherever they can place it. So usually it's going to be 2 facings maybe for the bottom or the top of the shelf.

Speaker 2

They really don't make a Dramatic change to the planogram. Then as that item starts to turn, what happens is you'll see it migrate from the bottom to the top of the shelf, a little bit closer to the bull's eye and then they'll change the mix of items. You could go from 2 or 4 facing sometimes to 6 and they'll dial in the mix of those SKUs to make sure that they have the right amount. It was true with Olive Garden, true with Chick Fil A, we're seeing it and Buffalo Wild Wings and that same thing seems to be playing out on Arby's. So it's very much running in line with what we thought and we're just thrilled that Arby's was willing partner with us on this proposition.

Speaker 2

Our team has done a great job of just loving on that business and executing it in retail.

Speaker 6

All right. Thanks for the color guys. That was great as always. Appreciate it.

Speaker 5

Of course. Thank you.

Operator

Thank you. To have a follow-up from the line of Andrew Wolf from C. L. King. Please proceed.

Speaker 3

Hi, thank you. It's a bit

Speaker 5

of a strategic question, but it's with the 3rd wave of the ERP implementation behind you. You've seen all you've handled different phases from beginning phase to getting things up and running and all that, working with a lot of consultants to doing it yourself. It seems you've addressed from the outside at least kind of all the contingencies and all the to processes one would go through. And I want to link this to potential M and A since getting a good ERP system is into a decent sized target would be a big part of realizing synergies of to various kinds. Where are you at with the ERP implementation as you guys think about it, Such that you would have enough confidence to say, we can take this target and do all we need to do with integration based on how the ERP implementation has gone.

Speaker 2

Sure. As we pointed out, Andrew, in our script, we've gone through wave 1, wave 2, wave 3. So we've taken the financial backbone and the GL, all of that's on our new system. And then sequentially, we've been rolling in plants and warehouses with our flagship factory and Horse Cape being really what comprise the better part of Wave 3. Now we still have Wave 4 that's out there that we're going to be driving in this current quarter.

Speaker 2

And really what that's going to be consisting of is bringing the last of to our dressing factories online and 2 of our dressing warehouses. So none of this is going to be new art that we're taking on in Wave 4. It's just you want to make sure that you have enough people in place to perform hypercare as you're fundamentally changing the way people are working so you can service the business. So we fully expect between now and when we're together with you in August talking about our Q4, we will have wrapped up our Wave 4. And really our Release 1 as we call it will be complete.

Speaker 2

What we expect to do at that point in time is really to focus around a period that we're calling to stabilization, utilization and training, where after really fundamentally changing the way people work in our factories and our warehouses, just bedding down the system, cleaning up the remnants of broken glass that may still exist and focusing on helping our people in those plants get far more efficient and effective in how they're doing this work. Now all of that also creates a window for us to talk about M and that's an item that we are very, very excited about. If you go back really to where we started the journey, this strategic journey you're talking about, we really started out as more of a confederation of companies that had been acquired rather than an integrated company. SAP has enabled us to do that. So from an optionality perspective, it's going to give us the ability to look at small businesses and integrate them into our network very tightly that should glean greater efficiencies, but it also gives us the ability to look at bigger scale acquisitions and do precisely that.

Speaker 2

It also allows us to follow some of our foodservice customers or others that want to grow internationally and do that far more effectively than we could have done it on our old platform. So from a timing perspective, between like I said, between now and when we're together in August talking about our Q4. We expect that period, Release 4 or Wave 4 to be behind us. We're going to be entering into the stabilization period. And at that point, really, it allows us to think about what we've described as all along, Lancaster calling 3.0, where these strategic acquisitions do who come into our consideration set.

Speaker 2

And it's a period we're super excited about. Really, if you look at the last 3 years, We went through an intense period of externally imposed change because of COVID and supply chain disruptions. Towards the tail end of that, we've gone through a self imposed period of internal change because of this SAP transformation. And I mean the only thing I could figure that would be more complicated would be to move the business to Mars because I got to tell I'm talking colonizing Mars because there for anybody that's lived through an ERP project, for the project team, for the business operators, I mean, even you can say a forklift operator, somebody working in our kitchens, they are forced to go back and relearn the way they do the work. So this external and internally imposed change is winding down.

Speaker 2

And what excites us is we're just going to focus on getting better, and that's going to allow for us then to figure out how we leverage the strength of the team and our balance sheet, which both are strong. And I feel like We it's a chance for us to think about really another chapter in our book where we can go and grow and create opportunities for people and our customers. So It's certainly an exciting period that we're looking forward to move towards. Thank you.

Speaker 5

And a follow-up on the training and utilization part that you'll be entering into fiscal 2024. Just a sense of my experience or my understanding of PRPs is after all the what you just described, the process, all the training and utilization, it's kind of cumulative. It's sort of crawl, walk, run and then Potentially exponential benefits if it really goes well. Do you feel you need to have some legs behind that before you would to get a target acquired because all right, you feel good about implementation, but do you also want to feel good about getting the payoff that you expected or do you feel you can implement and learn the payoff simultaneously and just bring in a new business as well?

Speaker 2

I guess the way I would the way we're thinking about it here in Columbus, Andrew, is really a reflection of the total weight on the branch, Right. How much weight do we have on the branch for the organization? In the last, let's call it the middle chunk, well, Really the better part of this whole year has had a lot of weight on the branch. We've had the ERP implementation, but the other thing we've done is we've doubled the size in square footage of our flagship factory. And that in and of itself brings with it a fair amount of complexity.

Speaker 2

We're seeing the weight of the branch from the expansion start to diminish. The weight of the branch from ERP will diminish. So I wouldn't go so far as to say we feel like we have to have the system perfected before we could entertain an acquisition. But I think we'd have to be able to look at the business and look at all the other things that we have going on and feel like there's a sufficient amount of weight available for the branch for us to take on an acquisition and make sure that we could service our strategic customers, retail and food service operators seamlessly.

Speaker 5

Thank you.

Operator

Thank you. I'm not showing any further questions. I will turn the call back to Mr. Cusinski for his concluding comments.

Speaker 2

Thank you, operator, and thank you everyone for your participation this morning. We look forward to sharing with you our Q4 results when we're back together in August. Have a great day.

Operator

Thank you again for participating and you may now

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Earnings Conference Call
Lancaster Colony Q3 2023
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