Flowers Foods Reports Fourth Quarter And Fiscal 2012 Results PR Newswire THOMASVILLE, Ga., Feb. 7, 2013 THOMASVILLE, Ga., Feb. 7, 2013 /PRNewswire/ -- Flowers Foods, Inc. (NYSE: FLO), today reported results for its 12 and 52 weeks ended December 29, 2012. Sales for the quarter increased 14.7% to $749.4 million and for the year sales increased 9.8% to $3.05 billion. Diluted EPS for the quarter was $0.28, up 64.7%. For the year, diluted EPS was up 8.9% to $0.98;adjusted for one-time charges in both years, 2012 dilutedEPS was $1.03, up 7.3% compared to $0.96 in 2011.Other highlights include: oEBITDA margin, excluding one-time charges, was 11.5% for the quarter and 10.9% for the year; oOperating margin (EBIT), excluding one-time charges, improved to 8.0% in the quarter and was up slightly for the year; oGross margin for the quarter and year were 47.9% and 46.9%, respectively; oVolume increased 10.3% in the quarter and 2.1% for the year; oNet price/mix for the quarter was negative 2.0% and positive 1.5% for the year; oAcquisitions contributed 6.4% of the quarter's sales and 6.2% of 2012 total sales; oThe Lepage Bakeries acquisition met expectations for sales and earnings; oNature's Own brand reached approximately $974 million in annual retail sales and became the nation's best-selling bread brand; and oSpecific guidance for 2013 is delayed pending the outcome of possible acquisitions. However, the company said results for 2013 are expected to meet or exceed long-term goals, excluding one-time charges. (Logo: http://photos.prnewswire.com/prnh/20080530/CLF007LOGO ) George E. Deese, Flowers Foods' chairman and chief executive officer, said, "The year 2012 was eventful for Flowers Foods and for our industry. We cycled our acquisition of Tasty Baking in the second quarter, acquired Lepage Bakeries in the third quarter, and announced an agreement to acquire the rights to Sara Lee and Earthgrains brands in California in the fourth quarter. In mid-November, our industry experienced another major change when Hostess Brands exited the marketplace. Our team rallied to meet the needs of new and existing customers as they felt the impact of Hostess' sudden departure. Our fourth quarter results show the benefit to sales and earnings that resulted from our team's outstanding efforts to serve our customers. "The marketplace remains in flux as the industry awaits the outcome of Hostess' bankruptcy proceedings and the resulting auctions of assets. We are delaying offering specific guidance for 2013 until we have more clarity regarding the Hostess situation as well as our pending transaction for the Sara Lee and Earthgrains brands in California," he continued. "Our team continues to execute well on our operating strategies and we do anticipate that sales and earnings for 2013 will meet or exceed our long-term objectives for 5% to 10% sales growth and double-digit earnings per share growth, excluding one-time charges," Deese said. On January 11, 2013, the company announced an agreement with Hostess to be the stalking horse bidder in the bankruptcy process for certain Hostess bread bakeries and bread brands. A competitive auction is scheduled for February 28, 2013, followed by a sale order hearing on March 5, 2013. If Flowers' bids are ultimately approved by the court, the transactions will remain subject to regulatory clearance. In November 2012, Flowers and Grupo Bimbo, S.A.B. de C.V. announced the U. S. Department of Justice had approved an agreement whereby Flowers would acquire certain assets and trademarks from BBU, Bimbo's American subsidiary, primarily the Sara Lee and Earthgrains brands for sliced breads, buns, and rolls in the state of California. The transaction is set for completion on February 23, 2013 with respect to Southern California followed by a staged roll-out of the acquired brands in the remainder of the state. On January 29, 2013, Grupo Bimbo filed a motion with the U. S. District Court for the District of Columbia seeking to temporarily suspend the transaction. A hearing on this matter is scheduled for February 13, 2013. Fourth Quarter 2012 Results Fourth quarter sales increased 14.7% to $749.4 million from $653.6 million in last year's fourth quarter. This increase was attributable to volume increases of 10.3%, partially offset by unfavorable net price/mix of 2.0%. Additionally, the Lepage Bakeries acquisition contributed 6.4% to sales. Dollar sales and volume increased across all channels. The largest volume increases were in the branded soft variety, branded white bread, branded buns and rolls, and foodservice categories. Net income for the quarter was $38.6 million compared to $23.0 million in the fourth quarter of fiscal 2011. For the quarter, diluted earnings per share were $0.28, an increase of 64.7%, compared to $0.17 in last year's fourth quarter. Gross margin as a percentage of sales for the quarter was 47.9%, up 200 basis points compared to 45.9% in the fourth quarter of 2011. This increase was due primarily to higher sales volumes and improved manufacturing efficiencies. For the quarter, selling, distribution, and administrative costs as a percent of sales were 36.5%, compared to 36.8% in the prior year. This decrease as a percent of sales was primarily attributable to our ability to leverage costs on increased sales. Depreciation and amortization expenses for the quarter remained relatively stable as a percent of sales compared to last year's fourth quarter. Net interest expense was incurred during the quarter due to higher interest expense resulting from the issuance in the first quarter of this year of $400.0 million of senior notes. The majority of the proceeds from the notes were used for the Lepage transaction. The effective tax rate for the quarter was 31.1% compared to 37.7% in last year's fourth quarter. This decrease was primarily due to positive discrete items in this year's fourth quarter. Operating income, also referred to as earnings before interest and taxes (EBIT), for the fourth quarter was $59.2 million, or 7.9% of sales compared to $36.6 million, or 5.6% of sales in last year's fourth quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fourth quarter was $85.1 million, or 11.4% of sales compared $59.6 million, or 9.1% of sales for the fourth quarter of 2011. One-time costs related to acquisitions affected EBIT and EBITDA by $1.1 million, or 10 basis points as a percent of sales in the fourth quarter. Segment Results DSD (82% of Sales): During the quarter, the company's direct store delivery (DSD) sales increased 13.9%, reflecting volume increases of 6.2% as well as a contribution of 7.7% from the Lepage acquisition. Net price/mix was relatively flat, quarter over quarter. Dollar sales and volume increased across all channels. The volume increases were primarily in the branded soft variety, branded white bread, branded buns and rolls, and fast food categories. Operating income for the DSD segment was $59.2 million, or 9.6% of sales for the fourth quarter compared to $40.7 million, or 7.5% of sales in last year's fourth quarter. This increase was due to the Lepage acquisition, increased sales volumes, and improved manufacturing efficiencies. Warehouse (18% of Sales): Sales through warehouse delivery increased 18.5%, reflecting increased volume of 22.6% and negative net price/mix of 4.1%. The increased volume was primarily the result of increases in branded cake, foodservice, and vending. Operating income for the warehouse segment was $12.8 million, or 9.5% of sales for the fourth quarter compared to $3.6 million, or 3.2% of sales in last year's fourth quarter. This increase was due primarily to increased sales volume. Cash Flow During the fourth quarter, cash flow from operating activities was $34.7 million. The company invested $18.1 million in capital improvements and paid dividends of $22.1 million to shareholders during the quarter. The company also acquired 265,000 shares of its common stock under its share repurchase plan for $5.1 million. Fiscal 2012 Results Sales for fiscal 2012 increased 9.8% to $3.05 billion from the $2.77 billion reported for fiscal 2011. This increase consisted of increased volume of 2.1% and positive net price/mix of 1.5%. Additionally, the Tasty and Lepage acquisitions contributed 6.2% to sales. Price/mix and volume increased across all channels. The volume increase was driven by branded soft variety bread, branded cake, store brand bread, buns and rolls, and foodservice. These increases were partially offset by volume decreases in store brand cake. Net income for the year was $136.1 million, compared to $123.4 million for fiscal 2011. Diluted earnings per share were $0.98 for fiscal 2012, compared to $0.90 reported for fiscal 2011. Excluding one-time costs of $6.2 million, net of tax, during fiscal 2012, diluted earnings per share were $1.03. This compares to diluted earnings per share of $0.96 in fiscal 2011, excluding one-time costs of $7.5 million, net of tax. Gross margin as a percent of sales for the full year was 46.9%, relatively flat compared to last year. Higher ingredient costs as a percent of sales were offset by lower workforce-related costs as a percent of sales, production volume increases, and increased manufacturing efficiencies. For the year, selling, distribution, and administrative costs as a percent of sales were 36.4%, compared to 36.7% in the prior year. One-time acquisition-related costs of $9.6 million negatively impacted selling, distribution and administrative costs 30 basis points as a percent of sales during 2012. During 2011, selling, distribution and administrative costs were negatively affected by one-time plant closure and acquisition-related costs of $8.3 million, or 30 basis points as a percent of sales. The company continues to effectively leverage its costs on increased sales volume. Depreciation and amortization expenses for the year remained relatively stable as a percent of sales compared to last year. We incurred net interest expense for the year of $9.7 million, compared to net interest income of $2.9 million last year due to interest expense incurred on the $400.0 million senior notes. The effective tax rate for the year was 34.8%, compared to 35.7% last year. This decrease was due primarily to favorable discrete items in 2012. EBIT for the year was $218.5 million, or 7.2% of sales compared to $189.0 million, or 6.8% of sales last year. During 2012, EBIT was negatively affected by one-time costs related to acquisitions of $9.6 million, or 30 basis points as a percent of sales. During 2011, EBIT was negatively affected by one-time plant closure and acquisition-related costs of $11.2 million, or 40 basis points as a percent of sales. EBITDA for the year was $321.2 million, or 10.5% of sales as compared to$283.7 million, or 10.2% of sales last year. During 2012, EBITDA was negatively affected by one-time costs related to acquisitions of $9.6 million, or 30 basis points as a percent of sales. During 2011, EBITDA was negatively affected by one-time plant closure andacquisition-related costs of $10.6 million, or 40 basis points as a percent of sales. Conference Call Flowers Foods will broadcast its fourth quarter and full year 2012 conference call over the Internet at 8:30 a.m. (Eastern) on February 7, 2013. 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 2012 sales of $3.05 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, Northeast, 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 52 For the 52 Week Week Week Week Period Period Period Period Ended Ended Ended Ended 12/29/12 12/31/11 12/29/12 12/31/11 Sales $ 749,442 $ 653,566 $ 3,046,491 $ 2,773,356 Materials, supplies, labor and other production costs (exclusive of depreciation 390,666 353,350 1,617,810 1,473,201 and amortization shown separately below) Selling, distribution and 273,651 240,650 1,107,480 1,016,491 administrative expenses Depreciation and 25,939 22,932 102,690 94,638 amortization Income from operations 59,186 36,634 218,511 189,026 (EBIT) Interest (expense) income, (3,212) 317 (9,739) 2,940 net Income before income taxes 55,974 36,951 208,772 191,966 (EBT) Income tax expense 17,407 13,913 72,651 68,538 Net income $ 38,567 $ 23,038 $ 136,121 $ 123,428 Net income per diluted $ 0.28 $ 0.17 $ 0.98 $ 0.90 common share Diluted weighted average 139,605 137,056 138,449 136,881 shares outstanding Flowers Foods, Inc. Segment Reporting (000's omitted) For the 12 For the 12 For the 52 For the 52 Week Week Week Week Period Period Period Period Ended Ended Ended Ended 12/29/12 12/31/11 12/29/12 12/31/11 Sales: Direct-Store-Delivery $ 614,899 $ 540,046 $ 2,508,856 $ 2,265,244 Warehouse Delivery 134,543 113,520 537,635 508,112 $ 749,442 $ 653,566 $ 3,046,491 $ 2,773,356 EBITDA: Direct-Store-Delivery $ 80,840 $ 59,010 $ 317,486 $ 277,626 Warehouse Delivery 16,877 8,117 54,497 47,119 Flowers Foods (12,592) (7,561) (50,782) (41,081) $ 85,125 $ 59,566 $ 321,201 $ 283,664 Depreciation and Amortization: Direct-Store-Delivery $ 21,606 $ 18,275 $ 84,290 $ 74,378 Warehouse Delivery 4,127 4,519 18,267 19,768 Flowers Foods 206 138 133 492 $ 25,939 $ 22,932 $ 102,690 $ 94,638 EBIT: Direct-Store-Delivery $ 59,234 $ 40,735 $ 233,196 $ 203,248 Warehouse Delivery 12,750 3,598 36,230 27,351 Flowers Foods (12,798) (7,699) (50,915) (41,573) $ 59,186 $ 36,634 $ 218,511 $ 189,026 Flowers Foods, Inc. Condensed Consolidated Balance Sheet (000's omitted) 12/29/12 Assets Cash and Cash Equivalents $ 13,275 Other Current Assets 442,389 Property, Plant & Equipment, net 725,836 Distributor Notes Receivable (includes $15,758 current 118,481 portion) Other Assets 44,558 Cost in Excess of Net Tangible Assets, net 658,281 Total Assets $ 2,002,820 Liabilities and Stockholders' Equity Current Liabilities $ 289,933 Bank Debt (includes $67,500 current portion) 178,000 Senior Notes due 2022 399,111 Other Debt and Capital Leases (includes $4,496 current 29,901 portion) Other Liabilities 247,255 Stockholders' Equity 858,620 Total Liabilities and Stockholders' Equity $ 2,002,820 Flowers Foods, Inc. Condensed Consolidated Statement of Cash Flows (000's omitted) For the 12 Week For the 52 Week Period Ended Period Ended 12/29/12 12/29/12 Cash flows from operating activities: Net income $ 38,567 $ 136,121 Adjustments to reconcile net income to net cash from operating activities: Total non-cash adjustments 30,409 144,854 Changes in assets and liabilities (34,325) (64,095) Net cash provided by operating activities 34,651 216,880 Cash flows from investing activities: Purchase of property, plant and (18,071) (67,259) equipment Acquisitions net of cash acquired (50) (318,476) Other (2,221) 298 Net cash disbursed for investing (20,342) (385,437) activities Cash flows from financing activities: Dividends paid (22,063) (86,489) Exercise of stock options 4,769 13,881 Excess windfall tax benefit related to 774 2,318 share-based payment awards Payments for debt issuance costs (5) (3,882) Payments of financing fees (558) (558) Stock repurchases (5,139) (18,726) Change in bank overdraft 3,397 6,684 Proceeds from debt borrowings 303,300 1,482,481 Debt and capital lease obligation (299,646) (1,221,660) payments Net cash (disbursed for) provided by (15,171) 174,049 financing activities Net (decrease) increase in cash and cash (862) 5,492 equivalents Cash and cash equivalents at beginning of 14,137 7,783 period Cash and cash equivalents at end of period $ 13,275 $ 13,275 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 52 For the 52 Week Week Week Week Period Period Period Ended Period Ended Ended Ended December December December 29, December 31, 29, 2012 31, 2011 2012 2011 Net income per diluted $ $ $ $ common share 0.28 0.17 0.98 0.90 Acquisition costs and - - 0.05 0.06 plant closure costs Adjusted net income per $ $ $ $ diluted common share 0.28 0.17 1.03 0.96 Reconciliation of Gross Margin For the 12 For the 12 For the 52 For the 52 Week Week Week Week Period Period Period Ended Period Ended Ended Ended December December December 29, December 31, 29, 2012 31, 2011 2012 2011 Sales $ $ $ $ 749,442 653,566 3,046,491 2,773,356 Materials, supplies, labor and other production costs 390,666 353,350 1,617,810 1,473,201 (exclusive of depreciation and amortization) Gross Margin excluding depreciation and 358,776 300,216 1,428,681 1,300,155 amortization Less depreciation and amortization for 17,614 15,781 69,912 65,271 production activities Gross Margin $ $ $ $ 341,162 284,435 1,358,769 1,234,884 Depreciation and $ $ $ $ amortization for 17,614 15,781 69,912 65,271 production activities Depreciation and amortization for selling, distribution 8,325 7,151 32,778 29,367 and administrative activities Total depreciation and $ $ $ $ amortization 25,939 22,932 102,690 94,638 Reconciliation of Net Income to Adjusted EBITDA For the 12 For the 12 For the 52 For the 52 Week Week Week Week Period Period Period Ended Period Ended Ended Ended December December December 29, December 31, 29, 2012 31, 2011 2012 2011 Net income $ $ $ $ 38,567 23,038 136,121 123,428 Income tax expense 17,407 13,913 72,651 68,538 Interest expense 3,212 (317) 9,739 (2,940) (income), net Depreciation and 25,939 22,932 102,690 94,638 amortization EBITDA 85,125 59,566 321,201 283,664 Acquisition costs and 1,085 (541) 9,560 10,654 plant closure costs Adjusted EBITDA $ $ $ $ 86,210 59,025 330,761 294,318 Reconciliation of Adjusted EBITDA to Cash Flow from Operations For the 12 For the 12 For the 52 For the 52 Week Week Week Week Period Period Period Ended Period Ended Ended Ended December December December 29, December 31, 29, 2012 31, 2011 2012 2011 Adjusted EBITDA $ $ $ $ 86,210 59,025 330,761 294,318 Adjustments to reconcile net income to net cash 4,470 13,254 42,164 (24,861) provided by operating activities Changes in assets and liabilities and pension (34,325) (19,719) (64,095) (58,915) contributions Income taxes (17,407) (13,913) (72,651) (68,538) Interest (expense) (3,212) 317 (9,739) 2,940 income, net Acquisition costs and (1,085) 541 (9,560) (10,654) plant closure costs Cash Flow From $ $ $ $ Operations 34,651 39,505 216,880 134,290 Reconciliation of EBIT to Adjusted EBIT For the 12 For the 12 For the 52 For the 52 Week Week Week Week Period Period Period Ended Period Ended Ended Ended December December December 29, December 31, 29, 2012 31, 2011 2012 2011 EBIT $ $ $ $ 59,186 36,634 218,511 189,026 Acquisition costs and 1,085 (541) 9,560 11,220 plant closure costs Adjusted EBIT $ $ $ $ 60,271 36,093 228,071 200,246 Flowers Foods, Inc. Sales Bridge Net Total Sales For the 12 Week Period Ended Volume Price/Mix Acquisition Change 12/29/12 Direct-Store-Delivery 6.2% 0.0% 7.7% 13.9% Warehouse Delivery 22.6% -4.1% 0.0% 18.5% Total Flowers Foods 10.3% -2.0% 6.4% 14.7% Net Total Sales For the 52 Week Period Ended Volume Price/Mix Acquisition Change 12/29/12 Direct-Store-Delivery 1.5% 1.6% 7.7% 10.8% Warehouse Delivery 3.6% 2.2% 0.0% 5.8% Total Flowers Foods 2.1% 1.5% 6.2% 9.8% SOURCE Flowers Foods, Inc. Website: http://www.flowersfoods.com Contact: Investor, Marta J. Turner, +1-229-227-2348, or Media, Keith Hancock, +1-229-227-2380
Flowers Foods Reports Fourth Quarter And Fiscal 2012 Results
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