Dale Ganobsik - Director of Investor Relations John Gerlach - Chairman, President and Chief Executive Officer Douglas Fell - Vice President, Chief Financial Officer and Treasurer.

Good morning. My name is Patrick and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation’s Fiscal Year 2015 Second Quarter Conference Call. Conducting today’s call will be Jay Gerlach, Lancaster Colony Chairman and CEO; and Doug Fell, Vice President, Treasurer and CFO.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer period. [Operator Instructions] And now to begin the conference call here is Dale Ganobsik, Director of Investor Relations for Lancaster Colony Corporation..

Thank you, Patrick. Good morning, everyone, and thank you for joining us today for Lancaster Colony’s fiscal 2015 second quarter conference call.

Let me remind everyone that before we begin our discussion this morning that our discussion 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 the company’s website lancastercolony.com later this afternoon. With that said, I will now turn the call over to Lancaster Colony’s Chairman and CEO, Jay Gerlach.

Jay?.

Good morning and thank you for joining us today to review our second quarter results. Our comments today will not reflect discontinued operations in the year-ago period. We are pleased to report second quarter sales, record second quarter sales of $303 million, up almost 4% from last year’s second quarter, while disappointed in our earnings.

Earnings per share reached $1.20 versus $1.36 in the year-ago quarter, which reflected a strong operating margin of 19.2% versus this year’s 16.6%.

In addition to the very strong quarter a year-ago, we continued to experience high cost due to our capacity constraints in the dressing and sauce portion of our business, plus continued investment in consumer marketing cost to support our brands and new product introductions.

We were pleased to see growth from both our retail and food service channels which was all volume driven. Our food service growth was at strong 7% while retail sales grew just over 1%, contributing to a decline in retail sales mix of over 1% to 55% retail in the quarter.

Our food service sales grew from what seems to be an improving environment for many restaurants helped by good promotional activity for certain customers.

Our retail sales were held by continued refrigerated salad dressing growth, good growth in our Olive Garden licensed dressing and frozen garlic breads, offset by a soft Sister Schubert holiday season. While our new retail products all contributed to gross sales, sliding cost investment and other promotional support offset most of those sales.

While generally pleased with the performance of our newer items including New York Brand, Soft Pull Apart loaf, and Whole Grain Texas Toast, and Marzetti and New York Brand salad toppings, we are not seeing the desired performance of our Presto Pasta line.

From a retail sell through standpoint, we maintained our leadership position in all five of our key categories. Our products outperformed in three categories per IRI data for the 12 weeks ending on December 28.

Our most challenging category in the period remains frozen dinner rolls with the category down about 3.5%, and our Sister Schubert’s brand down just under 2%.

Operating income for the quarter was impacted by the mix-shift to a bit heavier food service sales, additional cost related to our capacity constraints and increase in consumer marketing spend of just over $3 million and higher freight costs of $1.5 million.

Ingredient costs impact was about $1 million favorable with soy bean oil and sweetener savings, partly offset by much higher dairy costs. Price deflation in our food service channel largely offset these savings. Let me ask Doug Fell to make a few comments at this point..

Thank you, Jay. Relative to the balance sheet information contained within this morning’s release let me comment on some of the larger line items. Turning first to our accounts receivable, these increased modestly from the June level and in general reflect our stronger seasonal sales volumes for our second quarter period.

We continue to see our overall agings remain solid. With respect to our inventories that totaled nearly $69 million at December 31, we saw a decrease of nearly 8% since June. Consistent with past trends the decline during our second quarter largely reflects the depletion of seasonal frozen inventories on certain retail product lines.

The net balance of property, plant and equipment remain comparable to the June total with our current quarter capital expenditures totaling nearly $5 million and $13 million on a year-to-date basis. Our largest expenditure this quarter continues to relate to the ongoing expansion of our dressing and sauce capacity at our Kentucky plant.

The expansion project was essentially completed as planned in December. As mentioned in our previous quarter’s commentary. Not only will this expansion provide us a much needed capacity to support future growth, it will also allow us to gain better efficiencies and reduce a variety of incremental cost that affected our results in the current quarter.

With respect to our balance sheet capitalization, we continue to have no debt and over $561 million in total shareholders’ equity. We also ended the quarter with over $256 million in cash and equivalents, as we benefited from continued strong operating cash flows.

Given our balance sheet posture we continue to possess considerable flexibility to address foreseeable cash requirements, including those supportive of our future organic growth initiatives, acquisition opportunities, continued dividends and share repurchases.

Turning to our cash flows, cash flows for the first-half doubled nearly $45 million, down nearly $8.3 million from the prior year period. Cash flows from operating activities totaled approximately $83 million, which is down slightly from the $84 million provided in the first-half of last year.

In general, improvements in working capital largely offset the decline in net income. Cash outflows relating to capital expenditures increased nearly $8.7 million from that of the prior year period, which principally related to the capacity expansion project at our dressing and sauce plant in Kentucky.

Cash out flows relating to regular dividends during the first-half increased $1.7 million, largely reflecting the increase in our cash dividend per share. However, cash flows for our first-half of fiscal 2015 benefited by the absence of share repurchases, which totaled nearly $3 million in the prior year period.

Finally our current quarter and year-to-date effective tax rate of 34% remain consistent with that of the prior periods and consistent with the guidance we previously provided for fiscal 2015. Thanks again for your participation with us this morning and I will now turn the call back over to Jay for our concluding comments..

Thanks, Doug. Looking ahead to our second-half we see a continued improving consumer environment that may benefit our food service sales more than retail. We will see another shift in Easter related sales with the impact moving back to the third quarter this year. Most of our markets, both retail and food service remain very competitive.

We continue to be concerned about the performance of frozen in general and particularly our Sister Schubert brand. Our next round of new product introductions will be later in the spring, so no impact to speak of from these in the third quarter.

We have implemented a price increase on our Marzetti veggie dip line to help address the increased cost of dairy products. Premium operating cost due to our capacity constraints should move down throughout the quarter as the expansion project was completed in December and is up and running.

We now need to realign our production between plants to fully benefit from this new capacity. We look forward to finally being in a much better position to support future growth in our dressing and sauce lines.

While dairy costs are projected to be less unfavorable we are anniversarying many other reductions resulting in little projected ingredient cost savings in the third quarter. In spite of lower oil prices we see freight costs likely to show year-over-year increases as freight industry capacity constraints overcome any fuel savings.

While we are planning for ongoing support of our brands we will be cautious in the amount of spending in this area. We continue to pursue acquisition opportunities with the priority on branded retail product lines and preferably in the better for you area.

We have seen a bit more active deal flow but as always it’s unpredictable if and when we may actually make an acquisition. With our major capital project for the year complete we would estimate total capital spending for the year to be about $20 million.

We continue to consider our capital allocation as it relates to needs for investment in our existing business, acquisition opportunities, share repurchases and dividends. We did extend our string of annual cash dividend increases to 52 years, with an increase in our recent December payment. With that Patrick, we’re ready to take questions..

[Operator Instructions] Your first question comes from Jeffrey Thomasson [ph]. Sir, you’re on line..

Hi, thank you and good morning. I have two questions or one question just asking about two areas of your business - two areas of your weakness that you mentioned; one with an established brand, the Sister Schubert or just the frozen industry, and then also a newer product Presto Pasta.

So maybe just touch on what’s behind the weakness there with the frozen dinner roll industry and then also what do you think is happening with the Presto Pasta line?.

Jeff, I think there are two different things going on there, although overall again we’d - I think the whole industry sees frozen demand being a bit of a challenge, although we’ve been running counter to that in our New York Garlic Bread product line.

But as it relates to the dinner rolls, I’m not sure we’ve quite put our finger on what all the issues are there. It is a category that’s been a bit soft. We’ve performed a little bit better than the category. So I don’t know that we can necessarily point to particular competitive activity in the frozen case.

However, we do know that consumers got a lot of choice for fresh bread products throughout the store in the in-store bakery deli area, certainly as well as the bread isle, so a lot of potential competitive activity. So we’re still trying to figure out what the key issues are there with the consumer and then try to counteract those.

The Presto Pasta situation is one where we knew we had an uphill battle convincing the consumer on a brand new concept come into market, also obviously in the frozen case for a precooked pasta that could be prepared in as little as one minute in the microwave and yet have a high quality taste to it. And that’s proven to be a challenge.

We get great feedback from consumers that try the product. But the challenge is just that, getting them to try the product. And we think we’ve invested pretty heavily behind that and are evaluating at this point what our next steps are as it relates to that line..

Jay, do you think the Presto Pasta is priced right? It seems a little aggressive to me but that’s just one man’s opinion..

That’s not a feedback we’ve heard to any great degree, although again it’s still pretty limited at this point as it relates to the number of consumers that have bought it. But that’s certainly one thing we’ll be considering..

Okay. I’ll probably follow-up later today. Thanks so much..

Sure, you’re welcome..

[Operator Instructions] And presenters at this time there are no further questions in queue. I’ll now like to turn the call back to Mr. Gerlach for any closing remarks..

Well, we do appreciate you joining us this morning. We look forward to talking to you late April as it relates to our third quarter which as I mentioned earlier we’ll have a bit of an Easter impact in update. So we’ll talk to you then. Thank you..

Thank you. And this does conclude today’s conference call. You may now disconnect..