FLOWERS FOODS, INC. THOMASVILLE, Ga., Nov. 11, 2015 /PRNewswire/ -- Flowers Foods, Inc. (NYSE: FLO), producer of Nature's Own, Wonder, Tastykake, and other bakery foods, today reported financial results for the company's 12-week third quarter ended October 10, 2015.
Third Quarter 2015 Summary Financial Results
Compared to prior year third quarter
-- Sales((1)) increased 4.8% to $885 million
-- Adjusted EBITDA((2)) increased 6.1% to $105 million, adjusted net
income((3)) increased 8.3% to $48 million, and adjusted net income per
diluted common share((3)) increased 9.5% to $0.23
-- Including acquisition-related costs, facility closing costs, and the
effect of the tortilla facility divestiture during the prior year third
quarter, EBITDA((4)) decreased 0.7% to $99 million, net income decreased
1.8% to $44 million, and net income per diluted common share was
unchanged at $0.21
-- Dividends paid increased 20.8% to $0.1450 per share
(1) Prior period sales have been revised. See explanation in Form 10-Q, which will be filed November 12, 2015 and Form 10-K filed February 25, 2015.
(2) Adjusted Earnings before Interest, Taxes, Depreciation & Amortization; see reconciliation of non-GAAP measures in the financial statements following this release.
(3) See reconciliation of non-GAAP measures in the financial statements following this release.
(4) Earnings before Interest, Taxes, Depreciation & Amortization; see reconciliation of non-GAAP measures in the financial statements following this release.
Third Quarter Highlights
-- During the third quarter, acquired Dave's Killer Bread (DKB), the
leading brand of organic packaged bread in the United States. Early in
the fourth quarter, acquired Alpine Valley Bread Company (Alpine
Valley), further strengthening Flowers' organic brand portfolio and
production capacity.
-- For the 12-week third quarter of fiscal 2015, the increase in
consolidated sales reflects a volume increase of 3.6%, neutral
price/mix, and an increase of 1.2% attributable to the acquisition of
DKB.
-- Sales in expansion markets contributed 1.2% to the overall sales
increase during the quarter, driven by the acquired Hostess bread brands
and entrance into new markets. Flowers now reaches 83% of the U.S.
population through direct-store delivery (DSD) distribution.
-- The company generated $64.6 million of cash flow from operations during
the third quarter.
Fiscal 2015 Outlook - Updated
-- Including acquisitions, the company now anticipates 52-week fiscal 2015
sales of $3.818 billion to $3.842 billion and adjusted net income per
diluted common share of $0.96 to $0.98. Acquisitions are anticipated to
contribute approximately $50 million to $55 million to fiscal 2015 sales
and be neutral to net income per diluted common share. The company
continues to expect capital expenditures in the range of $85.0 to $95.0
million.
Segment Results for the Quarter
-------------------------------
12 Weeks Ended
October 10, 2015 October 4, 2014 % Chg.
---------------- --------------- ------
(Amounts in millions, except EPS)
Sales:
DSD Segment:
Branded Retail $471.4 $448.2 5.2
Store Branded Retail 108.7 108.2 0.5
Non-retail and Other(1) 166.2 157.4 5.6
----- -----
Total DSD Sales $746.3 $713.8 4.5
------ ------
Warehouse Segment:
Branded Retail $29.4 $29.1 1.0
Store Branded Retail 29.0 27.7 4.5
Non-retail and Other(1) 80.7 74.2 8.6
---- ----
Total Warehouse Sales 139.0 131.1 6.1
----- -----
Consolidated Sales $885.3 $844.9 4.8
====== ======
Adjusted EBITDA(2):
DSD Segment $100.5 $92.7 8.3
% of DSD Sales 13.5% 13.0%
Warehouse Segment 14.9 15.3 (2.4)
% of Warehouse Sales 10.7% 11.7%
Unallocated Corporate Expense(3) (10.5) (9.2) 14.4
----- ----
Consolidated Adjusted EBITDA(2) $104.9 $98.9 6.1
====== =====
% of Consolidated Sales 11.8% 11.7%
==== ====
Adjusted diluted EPS(2) $0.23 $0.21 9.5
===== =====
Note: Amounts and percentages may not compute due to rounding.
(1) Includes foodservice, vending, and contract manufacturing.
(2) See reconciliations of non-GAAP measures in the financial statements
following this release.
(3) Represents the company's corporate head office amounts.
Executive Commentary:
Allen L. Shiver, president and chief executive officer, said, "It is an exciting time at Flowers. The team is working hard to capture the potential of our strong brands and geographic reach. Our recently acquired organic bread brands - Dave's Killer Bread and Alpine Valley Bread - are on-trend with changing consumer preferences and provide Flowers with additional growth opportunities through expanded distribution. We recognize the quality and values these brands represent, and a key focus as we bring the Flowers, DKB, and Alpine Valley teams together will be to maintain the integrity of their great brands.
"Sales growth this quarter, excluding the impact of DKB, was driven by continued gains in our expansion markets, strong performance from our branded bread and rolls, and foodservice volume gains. Continuing a trend from the second quarter, our branded cake sales also posted year-over-year growth. Leveraging our consolidated sales growth, we grew adjusted EBITDA 6.1%.
Shiver continued, "This year, we've opened a new bakery in Lenexa, Kan., introduced new products under our existing brands, and completed acquisitions to support future growth. Considering all factors, it was necessary to narrow our outlook for 2015. Even so, as we look ahead to 2016, we are committed to capitalizing on the opportunities provided by our strategic acquisitions and building on our strong foundation."
DSD Segment Commentary
Of the total DSD segment sales increase, pricing/mix increased 0.2%, volume increased 2.9%, and the acquisition of Dave's Killer Bread contributed an additional 1.4%. Branded retail sales were strong, primarily due to volume increases in white and soft variety breads and the DKB acquisition contribution. New product introductions and further expansion in our DSD markets drove increased sales of Tastykake products. Driven primarily by the foodservice business, the non-retail and other category posted solid growth.
Adjusted EBITDA margin for the DSD segment increased as a percentage of sales due to lower ingredient costs and cost-saving initiatives, partially offset by higher workforce-related costs and increases in outside purchases of product, primarily due to capacity constraints at DKB.
Warehouse Segment Commentary
Of the Warehouse segment's sales increase, pricing/mix increased 0.6%, and volume increased 5.5%. The increase in branded retail sales was primarily due to volume gains in bakery deli and mix shift within branded snack cake. The improvement in store branded retail sales was primarily the result of higher store branded cake sales. The increase in non-retail and other sales was driven by new foodservice products.
EBITDA margin for the Warehouse segment decreased as a percentage of sales, primarily due to higher employee incentive costs and reduced efficiencies.
Consolidated Results Commentary
As compared to the prior year third quarter, consolidated adjusted EBITDA increased by 6.1%. Adjusted unallocated corporate expenses were elevated during the quarter, primarily due to higher consulting and legal expenses, and lower pension income - partially offset by lower stock-based compensation expense.
Interest expense declined due to lower average outstanding debt balances, while a higher average notes receivable balance drove an increase in interest income. Income tax expense as a percentage of pre-tax income increased primarily as a result of certain non-deductible acquisition-related costs.
Cash Flow
During the quarter, cash flow from operating activities was $64.6 million, capital expenditures were $20.7 million, cash paid for DKB, net of cash acquired, was $280.8 million, and dividends paid were $30.5 million.
Dividend and Share Repurchases
The board of directors will review the dividend at its next regularly scheduled meeting. Any action taken will be announced following that meeting.
During the quarter, the company made no share repurchases. There are 13.7 million shares remaining on the company's current share repurchase authorization.
Conference Call
Flowers Foods will broadcast its third quarter 2015 earnings conference call over the Internet at 8:30 a.m. (Eastern) on November 12, 2015. The call will be broadcast live on 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 website.
About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (NYSE: FLO) is one of the largest producers of fresh packaged bakery foods in the United States, with 2014 sales of $3.75 billion. Flowers operates bakeries across the country that produce a wide range of bakery products. Among the company's top brands are Nature's Own, Wonder, and Tastykake. Learn more at www.flowersfoods.com.
Forward-Looking Statements
Statements contained in this press release that are not historical facts are forward-looking statements. Forward-looking statements relate to current expectations regarding our future financial condition, performance and results of operations, planned capital expenditures, long-term objectives of management, supply and demand, pricing trends and market forces, and integration plans and expected benefits of transactions and are often identified by the use of words and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "would," "is likely to," "is expected to" or "will continue," or the negative of these terms or other comparable terminology. 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, including changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store-branded 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) energy and raw material costs and availability and hedging and counterparty risk, (g) our ability to fully integrate recent acquisitions into our business, (h) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value; (i) consolidation within the baking industry and related industries; (j) disruptions in our direct-store delivery system, including litigation or an adverse ruling from a court or regulatory or government body that could affect the independent contractor classification of our independent distributors, and (k) the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems. The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the company, including the risk factors included in our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and disclosures made in other filings with the SEC and company press releases, for other factors that may cause actual results to differ materially from those projected by the company. We caution you not to place undue reliance on forward-looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law.
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, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted net income per diluted common share.
EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation 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, adjusted EBITDA margin, adjusted net income, and adjusted net income per diluted common share exclude 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 acquisition-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 United States and should be considered in addition to, not in lieu of, GAAP reported measures. None of these non-GAAP measures should 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, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted net income per diluted common share, may differ from the methods used by other companies, and, accordingly, 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 EBITDA, adjusted EBITDA and adjusted net income, a reconciliation of adjusted EBITDA to cash flow from operations, a reconciliation of net income per diluted common share to adjusted net income per diluted common share and reconciliations of operating income (EBIT) to adjusted EBITDA by segment.
Flowers Foods, Inc.
Consolidated Statement of Income
--------------------------------
(000's omitted, except per share data)
For the 12 Week For the 12 Week For the 40 Week For the 40 Week
Period Ended Period Ended Period Ended Period Ended
------------ ------------ ------------ ------------
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
Sales $885,302 $844,932 $2,920,142 $2,871,640
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization
shown separately below) 464,045 442,978 1,507,214 1,496,874
Selling, distribution and administrative expenses 322,087 302,086 1,064,619 1,037,628
Impairment of assets 0 0 2,275 4,489
Depreciation and amortization 29,419 29,487 99,704 98,686
Income from operations (EBIT) 69,751 70,381 246,330 233,963
Interest expense, net (878) (1,410) (3,320) (6,316)
---- ------ ------ ------
Income before income taxes (EBT) 68,873 68,971 243,010 227,647
Income tax expense 25,077 24,372 86,065 79,918
------ ------ ------ ------
Net income $43,796 $44,599 $156,945 $147,729
Net income per diluted common share $0.21 $0.21 $0.74 $0.69
Diluted weighted average shares outstanding 213,310 213,154 212,921 213,005
======= ======= ======= =======
Flowers Foods, Inc.
Segment Reporting
-----------------
(000's omitted)
For the 12 Week For the 12 Week For the 40 Week For the 40 Week
Period Ended Period Ended Period Ended Period Ended
------------ ------------ ------------ ------------
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
Sales:
Direct-Store-Delivery $746,267 $713,846 $2,464,399 $2,413,332
Warehouse Delivery 139,035 131,086 455,743 458,308
$885,302 $844,932 $2,920,142 $2,871,640
EBITDA:
Direct-Store-Delivery (1) $99,731 $93,755 $339,171 $314,221
Warehouse Delivery 14,942 15,302 53,587 51,051
Unallocated Corporate (15,503) (9,189) (46,724) (32,623)
$99,170 $99,868 $346,034 $332,649
Depreciation and Amortization:
Direct-Store-Delivery $25,928 $26,015 $88,103 $87,286
Warehouse Delivery 3,549 3,469 11,920 11,649
Unallocated Corporate (58) 3 (319) (249)
$29,419 $29,487 $99,704 $98,686
EBIT:
Direct-Store-Delivery (1) $73,803 $67,740 $251,068 $226,935
Warehouse Delivery 11,393 11,833 41,667 39,402
Unallocated Corporate (15,445) (9,192) (46,405) (32,374)
$69,751 $70,381 $246,330 $233,963
(1) The 40 week period ended October 10, 2015 includes an asset impairment charge of $2.3 million. The 40 week period ended October 4, 2014 includes an asset impairment charge of $4.5 million.
Flowers Foods, Inc.
Condensed Consolidated Balance Sheet
------------------------------------
(000's omitted)
October 10, 2015
----------------
Assets
------
Cash and Cash Equivalents $8,780
Other Current Assets 483,895
Property, Plant & Equipment, net 784,612
Distributor Notes Receivable (includes $20,602 current portion) 182,987
Other Assets 46,128
Cost in Excess of Net Tangible Assets, net 1,245,841
---------
Total Assets $2,752,243
==========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities $328,457
Long-term Debt and Capital Leases (includes $53,465 current portion) 897,108
Other Liabilities 298,262
Stockholders' Equity 1,228,416
---------
Total Liabilities and Stockholders' Equity $2,752,243
==========
Flowers Foods, Inc.
Condensed Consolidated Statement of Cash Flows
----------------------------------------------
(000's omitted)
For the 12 Week Period Ended For the 40 Week Period Ended
---------------------------- ----------------------------
October 10, 2015 October 10, 2015
---------------- ----------------
Cash flows from operating activities:
Net income $43,796 $156,945
Adjustments to reconcile net income to net cash
from operating activities:
Total non-cash adjustments 36,698 129,093
Pension contributions and changes in assets and liabilities (15,886) (5,496)
Net cash provided by operating activities 64,608 280,542
------ -------
Cash flows from investing activities:
Purchase of property, plant and equipment (20,685) (61,258)
Acquisitions net of cash acquired (280,848) (280,848)
Other 1,804 9,008
Net cash disbursed for investing activities (299,729) (333,098)
-------- --------
Cash flows from financing activities:
Dividends paid (30,491) (89,672)
Exercise of stock options, including windfall tax benefit 22,217 27,313
Stock repurchases 0 (6,858)
Net proceeds from debt borrowings 202,500 134,500
Other 3,131 (11,470)
Net cash provided by financing activities 197,357 53,813
------- ------
Net increase (decrease) in cash and cash equivalents (37,764) 1,257
Cash and cash equivalents at beginning of period 46,544 7,523
Cash and cash equivalents at end of period $8,780 $8,780
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 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
Net income per diluted common share $0.21 $0.21 $0.74 $0.69
Asset impairment/Facility closure costs/Divestiture - - 0.01 0.02
Acquisition-related costs 0.02 - 0.02 -
Adjusted net income per diluted common share $0.23 $0.21 $0.77 $0.71
===== ===== ===== =====
Reconciliation of Net Income to Adjusted EBITDA
-----------------------------------------------
For the 12 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
Net income $43,796 $44,599 $156,945 $147,729
Income tax expense 25,077 24,372 86,065 79,918
Interest expense, net 878 1,410 3,320 6,316
Depreciation and amortization 29,419 29,487 99,704 98,686
------ ------ ------ ------
EBITDA 99,170 99,868 346,034 332,649
Asset impairment/Facility closure costs/Divestiture 736 (1,007) 3,011 3,482
Acquisition-related costs 4,991 - 4,991 -
----- --- ----- ---
Adjusted EBITDA $104,897 $98,861 $354,036 $336,131
======== ======= ======== ========
Reconciliation of Adjusted EBITDA to Cash Flow from Operations
--------------------------------------------------------------
For the 12 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
Adjusted EBITDA $104,897 $98,861 $354,036 $336,131
Adjustments to reconcile net income to net cash provided by operating activities 7,279 (2,972) 29,389 22,957
Pension contributions and changes in assets and liabilities (15,886) (23,783) (5,496) (49,130)
Income taxes (25,077) (24,372) (86,065) (79,918)
Interest expense, net (878) (1,410) (3,320) (6,316)
Asset impairment/Facility closure costs/Divestiture (736) 1,007 (3,011) (3,482)
Acquisition-related costs (4,991) - (4,991) -
------ --- ------ ---
Cash Flow From Operations $64,608 $47,331 $280,542 $220,242
======= ======= ======== ========
Reconciliation of Net Income to Adjusted Net Income
---------------------------------------------------
For the 12 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
Net income $43,796 $44,599 $156,945 $147,729
Asset impairment/Facility closure costs/Divestiture 473 (191) 1,949 2,705
Acquisition-related costs 3,839 - 3,839 -
----- -----
Adjusted net income $48,108 $44,408 $162,733 $150,434
======= ======= ======== ========
Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - DSD
-----------------------------------------------------------------
For the 12 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
EBIT $73,803 $67,740 $251,068 $226,935
Asset impairment/Facility closure costs/Divestiture 736 (1,007) 3,011 3,482
--- ------ ----- -----
Adjusted EBIT 74,539 66,733 254,079 230,417
Depreciation and amortization 25,928 26,015 88,103 87,286
------ ------ ------ ------
Adjusted EBITDA $100,467 $92,748 $342,182 $317,703
======== ======= ======== ========
Reconciliation of EBIT to EBITDA - Warehouse
--------------------------------------------
For the 12 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
EBIT $11,393 $11,833 $41,667 $39,402
Depreciation and amortization 3,549 3,469 11,920 11,649
----- ----- ------ ------
EBITDA $14,942 $15,302 $53,587 $51,051
======= ======= ======= =======
Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Corporate
-----------------------------------------------------------------------
For the 12 Week Period Ended For the 12 Week Period Ended For the 40 Week Period Ended For the 40 Week Period Ended
October 10, 2015 October 4, 2014 October 10, 2015 October 4, 2014
---------------- --------------- ---------------- ---------------
EBIT $(15,445) $(9,192) $(46,405) $(32,374)
Acquisition-related costs 4,991 - 4,991 -
Adjusted EBIT (10,454) (9,192) (41,414) (32,374)
Depreciation and amortization (58) 3 (319) (249)
--- --- ---- ----
Adjusted EBITDA $(10,512) $(9,189) $(41,733) $(32,623)
======== ======= ======== ========
Reconciliation of Earnings per Share -
Full Year Fiscal 2015 Guidance
---------------------------------------
Range Estimate
--------------
Net income per diluted common share $0.93 to $0.95
Asset impairment/Facility closure costs/Divestiture 0.01 0.01
Acquisition-related costs 0.02 0.02
Adjusted net income per diluted common share $0.96 to $0.98
===== =====
Flowers Foods, Inc.
Sales Bridge
------------
Net Total Sales
For the 12 Week Period Ended October 10, 2015 Volume Price/Mix Acquisition Change
--------------------------------------------- ------ --------- ----------- ------
Direct-Store-Delivery 2.9% 0.2% 1.4% 4.5%
Warehouse Delivery 5.5% 0.6% 0.0% 6.1%
Total Flowers Foods 3.6% 0.0% 1.2% 4.8%
------------------- --- ---
Net Total Sales
For the 40 Week Period Ended October 10, 2015 Volume Price/Mix Acquisition Change
--------------------------------------------- ------ --------- ----------- ------
Direct-Store-Delivery 1.4% 0.3% 0.4% 2.1%
Warehouse Delivery -0.6% 0.0% 0.0% -0.6%
Total Flowers Foods 1.0% 0.4% 0.3% 1.7%
------------------- --- ---
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SOURCE Flowers Foods, Inc.
