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Lancaster Colony Corp. reported higher sales but lower income from continuing operations for its first fiscal quarter ended Sept. 30, 2008:

• Net sales reached $264 million, up 8 percent from first quarter sales of $244 million last year.
• Specialty foods net sales totaled a record $220.8 million, up 19 percent from the year-ago level, reflecting both higher volumes and pricing.
• Glassware and candles sales were $43.1 million, a decline of 27 percent from the year-ago quarter, primarily reflecting the effect of divested glass operations.
• Income from continuing operations of $11,020,000, or 39 cents per diluted share, decreased 25 percent from the prior year's total of $14,647,000, or 48 cents per diluted share.
• Net income totaled $11,020,000, versus $15,570,000 in the year-ago first quarter, which included the results of discontinued operations. Net income per basic and diluted share was 39 cents versus 51 cents earned in the first quarter last year.
• The cash dividend was continued at the higher rate set in November 2007, and 296,000 shares were repurchased at a cost of $10.1 million.
• The company's strong balance sheet showed debt at Sept. 30 totaling $80 million, or approximately 18 percent of total capitalization.

John B. Gerlach, Jr., chairman and CEO, said in a prepared statement, "We were

generally pleased with our Specialty Foods performance given substantially higher material costs. Challenges facing our remaining nonfood operations were largely expected, although we anticipate some improvement going forward."

Specialty foods sales growth, led by frozen products, reflects volume from both the retail and foodservice channels. All growth was internally generated, with pricing contributing roughly half of the overall increase. Segment operating income of $23.5 million declined one percent from the year-ago level due to substantially higher commodity and other raw-material costs. These higher input costs totaled approximately $20 million, but were mitigated by the quarter's higher sales volume and pricing. The first quarter also included costs associated with consolidating the Atlanta dressing operation into other facilities totaling approximately $0.8 million.

Net sales of candles and related products were up slightly in the first quarter, while overall sales of the Glassware and Candles segment were impacted by the prior-year divestiture and closing of glass operations. Segment operating income declined by $5.3 million, reflecting the absence of contributions from the divested operations, higher wax costs and lower operating levels among other factors. Higher pricing is currently being implemented for many candle products.

Corporate expenses increased $0.3 million, reflecting costs associated with former nonfood manufacturing real estate held for sale. Approximately $0.8 million was related to the razing of a former industrial glass operation. These costs, along with the previously-mentioned food-facility closure costs, are presented as restructuring charges.

"Looking at our current second quarter," Gerlach said, "we believe that today we are better structured to confront the unusual macroeconomic conditions now before us. Despite very uncertain retail market conditions, our consolidated sales should see further growth driven by improving food sales. Operating income will likely show the benefits of a stronger top line. Also, the prior year second quarter results included a $5.7 million pretax loss associated with divested consumer and floral glass operations." Adversely impacting results will be higher material costs, lower fixed cost absorption at candle manufacturing operations and the absence of the prior year income contribution from the sold operations.

Gerlach added, "Our many strong market positions, seasoned executive teams and solid balance sheet provide the necessary foundation to take advantage of arising opportunities."