Flowers Foods Announces Third Quarter Results; Updates Guidance

       Flowers Foods Announces Third Quarter Results; Updates Guidance

PR Newswire

THOMASVILLE, Ga., Nov. 8, 2012

THOMASVILLE, Ga., Nov.8, 2012 /PRNewswire/ --

  oIncreased net sales by 6.2%
  oDelivered earnings per share of $0.22 as reported and $0.25 adjusted for
    one-time costs
  oIncreased operating income 
  oGenerated $55.4 million in cash flow from operations
  oCompleted the acquisition of Lepage Bakeries in Auburn, Maine
  o2012 sales guidance increase of 7% to 9% confirmed; earnings per share
    guidance tightened to 3.5% to 5% increase
  oOn October 24, announced the acquisition of certain assets and trademark
    licenses for Sara Lee and Earthgrains from BBU, Inc., a subsidiary of
    Grupo Bimbo S.A. B. de C.V.

Flowers Foods, Inc. (NYSE: FLO) today reported results for its 12 and 40 weeks
ended October 6, 2012. Sales were $717.3 million compared with $675.4 million
for the third quarter of 2011. Net income was $31.2 million, or $0.22 per
share-diluted, compared with $31.0 million, or $0.23 per share-diluted, in
last year's third quarter. Adjusted for one-time acquisition-related costs,
earnings per share were $0.25 for the quarter.

(Logo: http://photos.prnewswire.com/prnh/20080530/CLF007LOGO )

George E. Deese, Flowers Foods' chairman and chief executive officer, said,
"We delivered solid sales growth in the quarter in spite of a highly
competitive marketplace and continued economic pressure on consumers. Margins
were impacted by higher promotional activity and soft volumes. However, the
Lepage acquisition contributed nicely to our sales increase. We also achieved
positive price/mix that is encouraging. Nature's Own again drove our internal
growth, helping to offset lower sales of white breads, buns, and rolls.

"The integration of Lepage is going well with sales and earnings in line with
our expectations. We are introducing Nature's Own and Tastykake in the Lepage
market during the fourth quarter and are pleased with trade customers'
reaction to those brands as an add-on to Lepage's product offerings. The
recently announced acquisition of trademark licenses for the Sara Lee and
Earthgrains brands in California strengthens our position and gives us a
growth platform in that high population market for years to come. When the
transaction is completed, our fresh baked foods will be available to more than
75% of the U.S. population, which puts us ahead of our previously announced
goal. 

"In the fourth quarter, we have begun taking pricing to offset higher input
costs for 2013 and we also are reducing the frequency and depth of our
promotions.  We are confident in our team's ability to continue driving growth
as we leverage the power of our Nature's Own and Tastykake brands while
successfully integrating two highly strategic acquisitions into Flowers
Foods."

Third Quarter 2012 Results
For the 12-week third quarter of 2012, sales were $717.3 million, a 6.2%
increase from the $675.4 million in last year's third quarter. This increase
was attributable to favorable net price/mix of 2.7%, contributions from the
Lepage acquisition of 5.8%, partially offset by volume declines of 2.3%. The
favorable net price/mix was driven by the branded retail and non-retail
channels. The volume decline was a result of declines across all channels. In
the branded retail channel, cake and white bread volume declines were
partially offset by an increase in soft variety volume. Store brand cake
declines led the volume decrease in that channel. The non-retail channel
volume declines were primarily related to the institutional and contract
manufacturing categories, partially offset by increases in the foodservice
category.

Net income for the quarter was $31.2 million compared to $31.0 million in the
third quarter of fiscal 2011. For the quarter, diluted earnings per share were
$0.22, down 4.3% as compared to $0.23 in last year's third quarter. During the
third quarter this year, we incurred one-time acquisition-related costs of
$4.0 million, net of tax, or $0.03 per diluted share, and in last year's third
quarter, we incurred one-time costs related to the Tasty acquisition of $0.5
million, net of tax, but this had no effect on earnings per diluted share.

Gross margin as a percentage of sales for the quarter was 46.7%, up 80 basis
points from 45.9% in the third quarter of 2011. This increase was due
primarily to gross margin contributed by Lepage. Higher sales and improved
manufacturing efficiencies also contributed to the increase. Gross margin in
the quarter was negatively impacted by higher promotions.

Selling, distribution, and administrative costs as a percent of sales for the
quarter were 35.9%, up 50 basis points from 35.4% of sales in the third
quarter of fiscal 2011. Increases in acquisition-related and workforce-related
costs were the main drivers of the increase. The one-time acquisition-related
costs were $5.1 million, or 70 basis points as a percent of sales during the
third quarter this year and $0.7 million, or 10 basis points as a percent of
sales in last year's third quarter.

Depreciation and amortization expenses for the quarter remained relatively
stable as a percent of sales compared to last year's third quarter. We
incurred net interest expense during the quarter due to the issuance in the
second quarter of this year of $400.0 million of 4.375% senior notes due 2022,
with the majority of the proceeds from the notes used for the Lepage
transaction. The effective tax rate for the quarter was 36.4% as compared to
35.4% in last year's third quarter. This increase was primarily due to certain
temporary differences that reduced the Section 199 deduction and certain
non-deductible, acquisition-related costs.

Operating income, defined as earnings before interest and taxes (EBIT), for
the third quarter was $52.7 million, or 7.3% of sales as compared to $47.8
million, or 7.1% of sales in last year's third quarter. Earnings before
interest, taxes, depreciation, and amortization (EBITDA) for the third quarter
was $77.4 million, or 10.8% of sales compared to $70.6 million, or 10.5% of
sales for the third quarter of 2011. One-time acquisition-related costs
negatively affected EBIT and EBITDA by $5.1 million, or 70 basis points as a
percent of sales in this year's third quarter and by $0.7 million, or 10 basis
points as a percent of sales in last year's third quarter.

Segment Results
DSD (83% of sales): During the quarter, the company's direct-store-delivery
(DSD) sales increased 6.9%, reflecting positive net price/mix of 0.7%,
contribution from the Lepage acquisition of 7.0%, offset by volume decreases
of 0.8%. The positive net price/mix was primarily driven by the branded retail
channel, primarily cake. The volume decrease was a result of declines in the
branded cake, foodservice, and institutional categories, partially offset by
increases in the soft variety category.

Operating income for the DSD segment was $58.6 million, or 9.9% of sales for
the third quarter compared to $47.0 million, or 8.5% of sales in last year's
third quarter. This increase was attributable to the Lepage acquisition, lower
ingredient costs, and improved manufacturing efficiencies.

Warehouse (17% of sales): Sales through warehouse delivery increased 2.8%,
reflecting positive price/mix of 9.4%, partially offset by volume decreases of
6.6%. The positive price/mix was primarily attributable to the contract
manufacturing category in the non-retail channel. The volume decrease was the
result of declines in store brand cake and contract manufacturing, partially
offset by increased foodservice volume.

Operating income for the warehouse segment was $7.6 million, or 6.1% of sales
for the third quarter compared to $7.3 million, or 6.0% of sales in last
year's third quarter.

Cash Flow
During the third quarter, cash flow from operating activities was $55.4
million. The company invested $20.0 million in capital improvements and paid
dividends of $22.1 million to shareholders. During the quarter, under the
company's share repurchase plan, the company acquired 600,000 shares of its
common stock for $12.2 million, an average price per share of $20.39. Since
the inception of the plan, the company has acquired 38.5 million shares for
$444.4 million, an average of $11.55 per share.

Outlook for 2012
The company continues to expect 2012 sales to increase 7.0% to 9.0% over 2011.
Earnings per share are now expected to increase 3.5% to 5.0%, excluding
one-time costs, over the 2011 adjusted earnings per share of $0.96. Previous
guidance was for earnings per share to increase 3.5% to 8%. As previously
discussed, earnings per share are expected to be flat to slightly up,
excluding the contribution from the Lepage acquisition, which was completed
early in the third quarter.

Acquisition of Sara Lee and Earthgrains trademarks for California and Oklahoma
City
A summary of the company's acquisition of certain assets and trademark
licenses for Sara Lee and Earthgrains from BBU, Inc. will be given on
tomorrow's conference call.

Conference Call
Flowers Foods will broadcast its third quarter 2012 conference call over the
Internet at 8:30 a.m. (Eastern) on November 9, 2012. The call will be
broadcast live on Flowers' Web site, www.flowersfoods.com, and can be accessed
by clicking on the webcast link on the home page. The call also will be
archived on the company's Web site.

About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (NYSE: FLO) is the
second-largest producer and marketer of packaged bakery foods for retail and
foodservice customers in the United States with 2011 sales of $2.8 billion.
Flowers operates 44 bakeries that produce a wide range of bakery products.
These products are sold through a direct-store-delivery network with access to
approximately 70% of the U.S. population in the East, South, and Southwest as
well as in certain markets in California. Select Flowers products are sold
nationwide through customers' delivery systems. Among the company's top brands
are Nature's Own and Tastykake. For more information, visit
www.flowersfoods.com.

Statements contained in this press release that are not historical facts are
forward-looking statements. All forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ from those
projected. Other factors that may cause actual results to differ from the
forward-looking statements contained in this release and that may affect the
company's prospects in general include, but are not limited to, (a)
competitive conditions in the baked foods industry, including promotional and
price competition, (b) changes in consumer demand for our products, (c) the
success of productivity improvements and new product introductions, (d) a
significant reduction in business with any of our major customers including a
reduction from adverse developments in any of our customer's business, (e)
fluctuations in commodity pricing, (f) our ability to fully integrate recent
acquisitions into our business, and (g) our ability to achieve cash flow from
capital expenditures and acquisitions and the availability of new acquisitions
that build shareholder value. In addition, our results may also be affected
by general factors such as economic and business conditions (including the
baked foods markets), interest and inflation rates and such other factors as
are described in the company's filings with the Securities and Exchange
Commission.

Information Regarding Non-GAAP Financial Measures

The company prepares its consolidated financial statements in accordance with
U.S. Generally Accepted Accounting Principles (GAAP). However, from time to
time, the company may present in its public statements, press releases and SEC
filings, non-GAAP financial measures such as, EBITDA and gross margin
excluding depreciation and amortization to measure the performance of the
company and its operating divisions. EBITDA is used as the primary performance
measure in the company's Annual Executive Bonus Plan. The company defines
EBITDA as earnings from continuing operations before interest, income taxes,
depreciation, amortization and income attributable to non-controlling
interest. The company believes that EBITDA is a useful tool for managing the
operations of its business and is an indicator of the company's ability to
incur and service indebtedness and generate free cash flow. Furthermore,
pursuant to the terms of our credit facility, EBITDA is used to determine the
company's compliance with certain financial covenants. The company also
believes that EBITDA measures are commonly reported and widely used by
investors and other interested parties as measures of a company's operating
performance and debt servicing ability because EBITDA measures assist in
comparing performance on a consistent basis without regard to depreciation or
amortization, which can vary significantly depending upon accounting methods
and non-operating factors (such as historical cost). EBITDA is also a
widely-accepted financial indicator of a company's ability to incur and
service indebtedness. Adjusted EBITDA excludes additional costs that we
consider important to present to investors. These include, but are not limited
to, the costs of closing a plant or costs associated with merger-related
activities. We believe that financial information excluding certain
transactions not considered to be part of the ongoing business improves the
comparability of earnings results. We believe investors will be able to better
understand our earnings results if these transactions are excluded from the
results. These non-GAAP financial measures are measures of performance not
defined by accounting principles generally accepted in the Unites States and
should be considered in addition to, not in lieu of, GAAP reported measures.
EBITDA should not be considered an alternative to (a) income from operations
or net income (loss) as a measure of operating performance; (b) cash flows
provided by operating, investing and financing activities (as determined in
accordance with GAAP) as a measure of the company's ability to meet its cash
needs; or (c) any other indicator of performance or liquidity that has been
determined in accordance with GAAP. Our method of calculating EBITDA and
adjusted EBITDA may differ from the methods used by other companies, and,
accordingly, our measures of EBITDA and adjusted EBITDA may not be comparable
to similarly titled measures used by other companies. Gross margin excluding
depreciation and amortization is used as a performance measure to provide
additional transparent information regarding our results of operations on a
consolidated and segment basis. Changes in depreciation and amortization are
separately discussed and include depreciation and amortization for materials,
supplies, labor and other production costs and operating activities.
Presentation of gross margin includes depreciation and amortization in the
materials, supplies, labor and other production costs according to GAAP. Our
method of presenting gross margin excludes the depreciation and amortization
components, as discussed above. This presentation may differ from the methods
used by other companies and may not be comparable to similarly titled measures
used by other companies. The reconciliations attached provide a reconciliation
of our net income, the most comparable GAAP financial measure to adjusted
EBITDA from continuing operations, a reconciliation of adjusted EBITDA to cash
flow from operations, a reconciliation of our gross margin excluding
depreciation and amortization to GAAP gross margin and a reconciliation of
adjusted earnings per share.



Flowers Foods, Inc.
Consolidated Statement of Income
(000's omitted, except per share data)
                             For the 12   For the 12   For the 40   For the 40
                             Week         Week         Week         Week

                             Period       Period       Period       Period
                             Ended        Ended        Ended        Ended
                             10/06/12     10/08/11     10/06/12     10/08/11
Sales                      $ 717,282    $ 675,369    $ 2,297,049  $ 2,119,790
Materials, supplies, labor
and other production costs
(exclusive of depreciation   382,508      365,706      1,227,144    1,119,851
and amortization shown
separately below)
Selling, distribution and    257,326      239,084      833,829      775,841
administrative expenses
Depreciation and             24,757       22,816       76,751       71,706
amortization
Income from operations       52,691       47,763       159,325      152,392
(EBIT)
Interest (expense) income,   (3,568)      265          (6,527)      2,623
net
Income before income taxes   49,123       48,028       152,798      155,015
(EBT)
Income tax expense           17,892       17,009       55,244       54,625
Net income                 $ 31,231     $ 31,019     $ 97,554     $ 100,390
Net income per diluted     $ 0.22       $ 0.23       $ 0.71       $ 0.73
common share
Diluted weighted average     139,717      137,207      138,110      136,851
shares outstanding



Flowers Foods, Inc.
Segment Reporting
(000's omitted)
                             For the 12   For the 12   For the 40   For the 40
                             Week         Week         Week         Week

                             Period       Period       Period       Period
                             Ended        Ended        Ended        Ended
                             10/06/12     10/08/11     10/06/12     10/08/11
Sales:
 Direct-Store-Delivery   $ 592,250    $ 553,768    $ 1,893,957  $ 1,725,198
 Warehouse Delivery        125,032      121,601      403,092      394,592
                           $ 717,282    $ 675,369    $ 2,297,049  $ 2,119,790
EBITDA:
 Direct-Store-Delivery   $ 79,287     $ 65,024     $ 236,646    $ 218,616
 Warehouse Delivery        11,633       11,905       37,620       39,002
 Flowers Foods             (13,472)     (6,350)      (38,190)     (33,520)
                           $ 77,448     $ 70,579     $ 236,076    $ 224,098
Depreciation and
Amortization:
 Direct-Store-Delivery   $ 20,716     $ 18,069     $ 62,684     $ 56,103
 Warehouse Delivery        4,067        4,600        14,140       15,249
 Flowers Foods             (26)         147          (73)         354
                           $ 24,757     $ 22,816     $ 76,751     $ 71,706
EBIT:
 Direct-Store-Delivery   $ 58,571     $ 46,955     $ 173,962    $ 162,513
 Warehouse Delivery        7,566        7,305        23,480       23,753
 Flowers Foods             (13,446)     (6,497)      (38,117)     (33,874)
                           $ 52,691     $ 47,763     $ 159,325    $ 152,392



Flowers Foods, Inc.
Condensed Consolidated Balance Sheet
(000's omitted)
                                                                     10/06/12
Assets
 Cash and Cash Equivalents                                $      14,137
 Other Current Assets                                            383,131
 Property, Plant & Equipment, net                                728,912
 Distributor Notes Receivable (includes $14,773 current portion) 115,719
 Other Assets                                                    41,400
 Cost in Excess of Net Tangible Assets, net                      667,018
 Total Assets                                             $      1,950,317
Liabilities and Stockholders' Equity
 Current Liabilities                                      $      262,281
 Bank Debt (includes $67,500 current portion)                    174,100
 Senior Notes due 2022                                           399,089
 Other Debt and Capital Leases (includes $4,516 current portion) 30,734
 Other Liabilities                                               220,452
 Stockholders' Equity                                            863,661
 Total Liabilities and Stockholders' Equity               $      1,950,317



Flowers Foods, Inc.
Condensed Consolidated Statement of Cash Flows
(000's omitted)
                                             For the 12 Week   For the 40 Week
                                             Period Ended      Period Ended
                                             10/06/12          10/06/12
Cash flows from operating activities:
Net income                                $ 31,231          $ 97,554
Adjustments to reconcile net income to net
cash
 from operating activities:
 Total non-cash adjustments                  34,098            114,445
 Changes in assets and liabilities           (9,902)           (29,770)
Net cash provided by operating activities    55,427            182,229
Cash flows from investing activities:
 Purchase of property, plant and             (19,953)          (49,188)
 equipment
 Acquisitions net of cash acquired           (318,426)         (318,426)
 Other                                       542               2,519
Net cash disbursed for investing             (337,837)         (365,095)
activities
Cash flows from financing activities:
 Dividends paid                              (22,101)          (64,426)
 Exercise of stock options                  1,151             9,112
 Excess windfall tax benefit related to      115               1,544
 share-based payment awards
 Payments for debt issuance costs            (2)               (3,877)
 Stock repurchases                           (12,233)          (13,587)
 Change in bank overdraft                    8,436             3,287
 Proceeds from debt borrowings               447,841           1,179,181
 Debt and capital lease obligation           (348,989)         (922,014)
 payments
Net cash provided by financing activities    74,218            189,220
Net (decrease) increase in cash and cash     (208,192)         6,354
equivalents
Cash and cash equivalents at beginning of    222,329           7,783
period
Cash and cash equivalents at end of period $ 14,137          $ 14,137





Flowers Foods, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(000's omitted, except per share data)
                        Reconciliation of Earnings per Share
                        For the 12   For the 12   For the 40     For the 40
                        Week Period  Week Period  Week Period    Week Period

                        Ended        Ended       Ended         Ended
                        October 6,   October 8,   October 6,     October 8,
                        2012         2011         2012           2011
                        $       $       $        $      
Net income per diluted                              
common share                               0.71        0.73
                        0.22         0.23
Acquisition costs and   0.03         -            0.04           0.06
plant closure costs
Adjusted net income     $       $       $        $      
per diluted common                                  
share                                      0.75        0.79
                        0.25         0.23
                        Reconciliation of Gross Margin
                        For the 12   For the 12   For the 40     For the 40
                        Week Period  Week Period  Week Period    Week Period
                        Ended        Ended        Ended          Ended
                        October 6,   October 8,   October 6,     October 8,
                        2012         2011         2012           2011
                        $       $       $        $      
Sales                                               
                         717,282    675,369   2,297,049     2,119,790
Materials, supplies,
labor and other
production costs        382,508      365,706      1,227,144      1,119,851
(exclusive of
depreciation and
amortization)
Gross Margin excluding
depreciation and        334,774      309,663      1,069,905      999,939
amortization
Less depreciation and
amortization for        16,167       15,751       52,298         49,490
production activities
                        $       $       $        $      
Gross Margin                                          
                         318,607    293,912   1,017,607     950,449
Depreciation and        $       $       $        $      
amortization for                                    
production activities     16,167    15,751  52,298        49,490
Depreciation and
amortization for
selling, distribution   8,590        7,065        24,453         22,216
and administrative
activities
Total depreciation and  $       $       $        $      
amortization                                        
                          24,757    22,816  76,751        71,706
                        Reconciliation of Net Income to Adjusted EBITDA
                        For the 12   For the 12   For the 40     For the 40
                        Week Period  Week Period  Week Period    Week Period
                        Ended        Ended        Ended          Ended
                        October 6,   October 8,   October 6,     October 8,
                        2012         2011         2012           2011
                        $       $       $        $      
Net income                                         
                          31,231    31,019  97,554        100,390
Income tax expense      17,892       17,009       55,244         54,625
Interest expense        3,568        (265)        6,527          (2,623)
(income), net
Depreciation and        24,757       22,816       76,751         71,706
amortization
EBITDA                  77,448       70,579       236,076        224,098
Acquisition costs and   5,086        716          8,475          11,195
plant closure costs
                        $       $       $        $      
Adjusted EBITDA                                     
                          82,534    71,295  244,551       235,293
                        Reconciliation of Adjusted EBITDA to Cash Flow from
                        Operations
                        For the 12   For the 12   For the 40     For the 40
                        Week Period  Week Period  Week Period    Week Period
                        Ended        Ended        Ended          Ended
                        October 6,   October 8,   October 6,     October 8,
                        2012         2011         2012           2011
                        $       $       $        $      
Adjusted EBITDA                                    
                          82,534    71,295  244,551       235,293
Adjustments to
reconcile net income
to net cash provided    9,341        (7,075)      37,694         (38,115)
by operating
activities
Changes in assets and
liabilities and         (9,902)      (18,156)     (29,770)       (39,196)
pension contributions
Income taxes            (17,892)     (17,009)     (55,244)       (54,625)
Interest (expense)      (3,568)      265          (6,527)        2,623
income, net
Acquisition costs and   (5,086)      (716)        (8,475)        (11,195)
plant closure costs
Cash Flow From          $       $       $        $      
Operations                                           
                          55,427    28,604  182,229       94,785
                        Reconciliation of EBIT to Adjusted EBIT
                        For the 12   For the 12   For the 40     For the 40
                        Week Period  Week Period  Week Period    Week Period
                        Ended        Ended        Ended          Ended
                        October 6,   October 8,   October 6,     October 8,
                        2012         2011         2012           2011
                        $       $       $        $      
EBIT                                                
                          52,691    47,763  159,325       152,392
Acquisition costs and   5,086        716          8,475          11,761
plant closure costs
                        $       $       $        $      
Adjusted EBIT                                       
                          57,777    48,479  167,800       164,153



Flowers Foods, Inc.
Sales Bridge
                                             Net                   Total Sales
For the 12 Week Period Ended 10/06/12 Volume Price/Mix Acquisition Change
Direct-Store-Delivery                 -0.8%  0.7%      7.0%        6.9%
Warehouse Delivery                    -6.6%  9.4%      0.0%        2.8%
Total Flowers Foods                   -2.3%  2.7%      5.8%        6.2%
                                             Net                   Total Sales
For the 40 Week Period Ended 10/06/12 Volume Price/Mix Acquisition Change
Direct-Store-Delivery                 0.2%   2.0%      7.6%        9.8%
Warehouse Delivery                    -1.6%  3.8%      0.0%        2.2%
Total Flowers Foods                   -0.3%  2.5%      6.2%        8.4%

SOURCE Flowers Foods, Inc.

Website: http://www.flowersfoods.com
Contact: Investor, Marta J. Turner, +1-229-227-2348, Media, Keith Hancock,
+1-229-227-2380
 
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