Attached files
file | filename |
---|---|
8-K - FORM 8-K - FLOWERS FOODS INC | g27302e8vk.htm |
EXHIBIT 99.1
May 19, 2011
|
Company Press Release | Flowers Foods (NYSE: FLO) |
FLOWERS FOODS ANNOUNCES FIRST QUARTER RESULTS
THOMASVILLE, GAFlowers Foods, Inc. (NYSE: FLO), today reported sales and earnings for its 16-week
first quarter ended April 23, 2011. In summary, Flowers Foods:
| Achieved $.45 diluted earnings per share compared to $.44 in the first quarter last year. Excluding charges related to a bakery closure and a pending merger, earnings per share increased 13.6% to $.50. |
| Reported a sales increase of .9% compared to first quarter last year. |
| Generated cash flow from operations of $72.6 million. |
| Outlined long-term growth goals at a March analyst event. |
| Announced an all cash merger agreement with Tasty Baking Company. |
The first quarter of 2011 was eventful for Flowers Foods, said George E. Deese, Chairman of the
Board and Chief Executive Officer. We achieved a modest sales increase and solid growth in
earnings per share, excluding one-time charges. At our analyst event in March, we reset our growth
targets, anticipating that ongoing industry consolidation will bring greater opportunity for
mergers and acquisitions. In April, we announced the merger agreement with Tasty Baking, which
will strengthen our snack cake business and extend the geographic reach of our Natures Own brand
and other fresh bakery foods.
As the year unfolds, we expect to grow sales as we reach new customers, new markets, and take
advantage of opportunities presented with the Tasty merger. Our focus is on improving operations
and increasing prices to offset higher costs, managing our core business to maintain share and
volume, completing the Tasty merger and planning for a smooth integration, and exploring growth
opportunities, Deese said.
First Quarter 2011 Results
For the 16-week first quarter of 2011, sales increased .9% to $801.8 million compared to $795.0
million in last years first quarter. The sales increase was attributable to favorable net
pricing/mix of 2.1%, partially offset by decreased volume of 1.2%. The price/mix increase was
driven primarily by price across all categories. Volume was impacted by lower-than-planned sales in
the branded retail and foodservice channels.
1
DSD Segment: During the quarter, the companys direct-store-delivery (DSD) sales increased .1%.
This increase consisted of positive net pricing/mix of 1.9%, partially offset by a volume decline
of 1.8%. As a result of the positive price/mix, dollar sales in the branded retail channel
increased quarter over quarter. The volume decline was primarily the result of decreases in the
branded retail and foodservice channels, partially offset by increases in the store brand channel.
Volume declines in white bread and soft variety bread resulted in lower branded volume, while
declines in quick-serve and other restaurants primarily caused lower foodservice volume.
Warehouse Delivery Segment: Sales in the warehouse delivery segment increased 4.1% due to positive
net pricing /mix, with volume being flat quarter over quarter. This increase was driven mainly by
increases in store brand cake and, to a lesser extent, higher foodservice sales.
Net income for the quarter was $41.2 million, an increase of 1.2% over the $40.7 million reported
for the first quarter of fiscal 2010. Diluted earnings per share was $.45, a 2.3% increase over the
$.44 diluted earnings per share reported for last years first quarter. We incurred costs, net of
operational savings, of $4.2 million, net of tax, or $.05 per diluted share relating to the closure
of a bakery and the impending merger with Tasty Baking. We expect the effect of the bakery closure
on the full year to be neutral to slightly dilutive.
Gross margin as a percent of sales for the quarter increased 80 basis points to 48.6% compared to
47.8% in the prior years first quarter. This increase was due primarily to a decrease in
ingredient costs as a percent of sales, partially offset by increases in packaging and
workforce-related costs as a percent of sales. Net of operational savings, costs associated with
the bakery closure negatively impacted gross margin $2.8 million, or 30 basis points as a percent
of sales.
Selling, distribution, and administrative costs as a percent of sales for the quarter were 37.4%
compared to 36.8% in the same quarter last year. Costs associated with the closed bakery, net of
operational savings, and the pending merger negatively impacted selling, distribution, and
administrative costs $3.1 million, or 40 basis points as a percent of sales.
Depreciation and amortization expenses for the quarter increased 30 basis points as a percent of
sales compared to last years first quarter due to equipment placed in service during the second
half of 2010 and accelerated depreciation of $.6 million on certain equipment related to the plant
closure. Net interest income for the quarter was $.6 million higher than last years first quarter
due to lower interest expense as
2
a result of less debt outstanding. The effective tax rate for the
quarter was 35.0% as compared to 35.6% in the first quarter last year. The full-year tax rate is
expected to be approximately 35.0% to 35.5%.
Operating margin as a percent of sales for the quarter was 7.7% compared to 7.8% in last years
first quarter. The bakery closure costs, net of operational savings, and merger-related costs
negatively affected operating margin $6.5 million, or 80 basis points as a percent of sales. EBITDA
as a percent of sales for the first quarter was 11.2% compared to 11.0% for the same quarter last
year. The bakery closure, net of operational savings, and merger-related costs negatively affected
EBITDA $5.9 million, or 70 basis points as a percent of sales.
During the quarter, the company invested $22.1 million in capital improvements and paid dividends
of $18.1 million to shareholders. The company also acquired 695,403 shares of its common stock
under its share repurchase plan for $18.0 million, an average of $25.93 per share. Since the
inception of the share repurchase plan, the company has acquired 24.9 million shares of its common
stock for $422.2 million, an average of $16.96 per share. The plan authorizes the company to
repurchase up to 30.0 million shares of common stock.
Fiscal 2011 Guidance
Regarding guidance for fiscal 2011, Deese said the company continues to expect sales growth of 3.0%
to 6.0%, excluding future acquisitions or mergers, and diluted earnings per share growth of 5.0% to
10.0%. Capital expenditures for fiscal 2011 still are expected to be $90 million to $100 million.
This guidance excludes the impact of the Tasty merger.
Long-Term Goals
At an analyst event in March, the company reset its long-term goals, anticipating annual sales
growth of 5% to 10% (including acquisitions), including 3% to 5% organic growth and 2% to 5% growth
through acquisitions. Over the long term, the company projects double-digit earnings per share
growth and EBITDA margin of 11% to 13%.
Flowers/Tasty Merger
The company said it expects to complete its merger with Tasty Baking in the second quarter. In
April, Flowers Foods and Tasty Baking announced a definitive merger agreement whereby Flowers will
acquire all of the outstanding shares of Tasty Baking common stock for $4.00 per share in cash for
a total purchase price of approximately $165 million, including Tasty Baking existing indebtedness.
The transaction is expected to strengthen Flowers snack cake business through the addition of the
iconic
3
Tastykake snack cake brand and expand Flowers geographic reach, immediately adding more
than 24 million consumers who are contiguous to Flowers current footprint. Tasty Baking is
expected to add approximately $115 million to $125 million to Flowers 2011 sales, contribute
approximately $10 million to $12 million to 2011 EBITDA, and be neutral to slightly accretive to
2011 earnings per share, excluding one-time costs of the transaction. Flowers expects Tasty Baking
to add approximately $210 million to $225 million to Flowers 2012 sales, contribute approximately
$25 million to $30 million to 2012 EBITDA, and contribute approximately $.06 to $.09 per diluted
share.
Dividend
The board of directors will consider the dividend at its regularly scheduled meeting. Any action
taken will be announced following that meeting.
Conference Call
Flowers Foods will broadcast its first quarter 2011 conference call over the Internet at 8:30 a.m.
(Eastern) on May 19, 2011. 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 companys Web site.
Company Information
Headquartered in Thomasville, Ga., Flowers Foods is one of the nations leading producers and
marketers of packaged bakery foods for retail and foodservice customers. Among the companys top
brands are Natures Own, Whitewheat, Cobblestone Mill, Blue Bird, and Mrs. Freshleys. Flowers
operates 39 bakeries that are among the most efficient in the baking industry. Flowers Foods
produces, markets, and distributes fresh bakery products that are delivered to customers daily
through a direct-store-delivery system serving the Southeast, Mid-Atlantic, and Southwest as well
as select markets in California and Nevada. The company also produces and distributes fresh snack
cakes and frozen breads and rolls nationally through warehouse distribution. 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
companys 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 customers 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 companys filings with
the Securities and Exchange Commission.
4
Investor Contact: Marta J. Turner (229) 227-2348
Media Contact: Keith Hancock (229) 227-2380
Media Contact: Keith Hancock (229) 227-2380
5
Flowers Foods
Consolidated Statement of Income
(000s omitted, except per share data)
Consolidated Statement of Income
(000s omitted, except per share data)
For the 16 Week | For the 16 Week | |||||||
Period Ended | Period Ended | |||||||
04/23/11 | 04/24/10 | |||||||
Sales |
$ | 801,825 | $ | 795,026 | ||||
Materials, supplies, labor and other production costs
(exclusive of depreciation and amortization shown
separately below) |
412,258 | 414,798 | ||||||
Selling, distribution and administrative expenses |
300,057 | 292,551 | ||||||
Depreciation and amortization |
27,992 | 25,637 | ||||||
Income before interest and income taxes (EBIT) |
61,518 | 62,040 | ||||||
Interest income, net |
1,762 | 1,131 | ||||||
Income before income taxes (EBT) |
63,280 | 63,171 | ||||||
Income tax expense |
22,119 | 22,484 | ||||||
Net income |
$ | 41,161 | $ | 40,687 | ||||
Diluted earnings per share amounts: |
||||||||
Net income |
$ | 0.45 | $ | 0.44 | ||||
Diluted weighted average
shares outstanding |
90,987 | 92,204 | ||||||
Flowers Foods
Segment Reporting
(000s omitted)
Segment Reporting
(000s omitted)
For the 16 Week | For the 16 Week | |||||||
Period Ended | Period Ended | |||||||
04/23/11 | 04/24/10 | |||||||
Sales: |
||||||||
Direct-Store-Delivery |
$ | 646,850 | $ | 646,174 | ||||
Warehouse Delivery |
154,975 | 148,852 | ||||||
$ | 801,825 | $ | 795,026 | |||||
EBITDA: |
||||||||
Direct-Store-Delivery |
$ | 86,086 | $ | 80,785 | ||||
Warehouse Delivery |
17,387 | 19,069 | ||||||
Flowers Foods |
(13,963 | ) | (12,177 | ) | ||||
$ | 89,510 | $ | 87,677 | |||||
Depreciation and Amortization: |
||||||||
Direct-Store-Delivery |
$ | 21,867 | $ | 20,102 | ||||
Warehouse Delivery |
6,056 | 5,536 | ||||||
Flowers Foods |
69 | (1 | ) | |||||
$ | 27,992 | $ | 25,637 | |||||
EBIT: |
||||||||
Direct-Store-Delivery |
$ | 64,219 | $ | 60,683 | ||||
Warehouse Delivery |
11,331 | 13,533 | ||||||
Flowers Foods |
(14,032 | ) | (12,176 | ) | ||||
$ | 61,518 | $ | 62,040 | |||||
Flowers Foods
Condensed Consolidated Balance Sheet
(000s omitted)
Condensed Consolidated Balance Sheet
(000s omitted)
04/23/11 | ||||
Assets |
||||
Cash and Cash Equivalents |
$ | 8,667 | ||
Other Current Assets |
307,863 | |||
Property, Plant & Equipment, net |
600,313 | |||
Distributor Notes Receivable (includes $12,704 current portion) |
105,044 | |||
Other Assets |
18,547 | |||
Cost in Excess of Net Tangible Assets, net |
295,341 | |||
Total Assets |
$ | 1,335,775 | ||
Liabilities and Stockholders Equity |
||||
Current Liabilities |
$ | 231,323 | ||
Bank Debt (includes $26,250 current portion) |
108,750 | |||
Other Debt and Capital Leases (includes $2,847 current portion) |
10,953 | |||
Other Liabilities |
186,545 | |||
Stockholders Equity |
798,204 | |||
Total Liabilities and Stockholders Equity |
$ | 1,335,775 | ||
Flowers Foods
Condensed Consolidated Statement of Cash Flows
(000s omitted)
Condensed Consolidated Statement of Cash Flows
(000s omitted)
For the 16 Week | ||||
Period Ended | ||||
04/23/11 | ||||
Cash flows from operating activities: |
||||
Net income |
$ | 41,161 | ||
Adjustments to reconcile net income to net cash
from operating activities: |
||||
Total non-cash adjustments |
7,964 | |||
Changes in assets and liabilities |
23,429 | |||
Net cash provided by operating activities |
72,554 | |||
Cash flows from investing activities: |
||||
Purchase of property, plant and equipment |
(22,058 | ) | ||
Other |
(3,916 | ) | ||
Net cash disbursed for investing activities |
(25,974 | ) | ||
Cash flows from financing activities: |
||||
Dividends paid |
(18,078 | ) | ||
Stock options exercised |
1,007 | |||
Income tax benefit related to stock awards |
577 | |||
Stock repurchases |
(18,029 | ) | ||
Decrease in book overdraft |
(2,604 | ) | ||
Proceeds from debt borrowings |
93,500 | |||
Debt and capital lease obligation payments |
(101,041 | ) | ||
Net cash disbursed for financing activities |
(44,668 | ) | ||
Net increase in cash and cash equivalents |
1,912 | |||
Cash and cash equivalents at beginning of period |
6,755 | |||
Cash and cash equivalents at end of period |
$ | 8,667 | ||
Flowers Foods
Reconciliation of GAAP to Non-GAAP Measures
(000s omitted)
Reconciliation of GAAP to Non-GAAP Measures
(000s omitted)
Reconciliation of Earnings per Share | ||||||||
For the 16 Week | For the 16 Week | |||||||
Period Ended | Period Ended | |||||||
April 23, 2011 | April 24, 2010 | |||||||
Earnings per diluted share |
$ | 0.45 | $ | 0.44 | ||||
Bakery closure costs, net of operational savings |
0.04 | | ||||||
Costs of pending merger |
0.01 | | ||||||
Adjusted earnings per diluted share |
$ | 0.50 | $ | 0.44 | ||||
Reconciliation of Gross Margin | ||||||||
For the 16 Week | For the 16 Week | |||||||
Period Ended | Period Ended | |||||||
April 23, 2011 | April 24, 2010 | |||||||
Sales |
$ | 801,825 | $ | 795,026 | ||||
Materials, supplies, labor and other production costs
(exclusive of depreciation and amortization) |
412,258 | 414,798 | ||||||
Gross Margin excluding depreciation and amortization |
389,567 | 380,228 | ||||||
Less depreciation and amortization for production activities |
19,184 | 17,728 | ||||||
Gross Margin |
$ | 370,383 | $ | 362,500 | ||||
Depreciation and amortization for production activities |
$ | 19,184 | $ | 17,728 | ||||
Depreciation and amortization for selling, distribution and
administrative activities |
8,808 | 7,909 | ||||||
Total depreciation and amortization |
$ | 27,992 | $ | 25,637 | ||||
Reconciliation of Net Income to Adjusted EBITDA | ||||||||
For the 16 Week | For the 16 Week | |||||||
Period Ended | Period Ended | |||||||
April 23, 2011 | April 24, 2010 | |||||||
Net income |
$ | 41,161 | $ | 40,687 | ||||
Income tax expense |
22,119 | 22,484 | ||||||
Interest income, net |
(1,762 | ) | (1,131 | ) | ||||
Depreciation and amortization |
27,992 | 25,637 | ||||||
EBITDA |
89,510 | 87,677 | ||||||
Bakery
closure costs net of operational savings and costs of pending merger |
5,949 | | ||||||
Adjusted EBITDA |
$ | 95,459 | $ | 87,677 | ||||
Flowers Foods
Sales Bridge
Net | Total Sales | |||||||||||
For the 16 Week Period Ended 04/23/11 | Volume | Price/Mix | Change | |||||||||
Direct-Store-Delivery |
-1.8 | % | 1.9 | % | 0.1 | % | ||||||
Warehouse Delivery |
0.0 | % | 4.1 | % | 4.1 | % | ||||||
Total Flowers Foods |
-1.2 | % | 2.1 | % | 0.9 | % |