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Flowers Foods, Inc. Reports Third Quarter 2017 Results

THOMASVILLE, Ga., Nov. 8, 2017 /PRNewswire/ -- Flowers Foods, Inc. (NYSE: FLO), producer of Nature's Own, Wonder, Tastykake, Dave's Killer Bread, and other bakery foods, today reported financial results for the company's 12-week third quarter ended October 7, 2017.

Third Quarter Summary:
Compared to the prior year third quarter where applicable

  • Sales increased 1.5% to $932.8 million. Excluding sales related to a divestiture, sales increased 2.1%.
  • Diluted EPS decreased $0.35 to a loss of $0.16.
  • Adjusted diluted EPS(1) increased 9.5% to $0.23.
  • Net income decreased $73.8 million to a loss of $33.6 million.
  • Adjusted net income(1) increased 9.7% to $48.3 million.
  • Adjusted EBITDA(2) increased 9.1% to $112.4 million.
  • Adjusted EBITDA(2) margin increased 80 basis points to 12.0% of sales.

(1)   Adjusted for items affecting comparability. See reconciliations of non-GAAP measures in the financial statements following this release.
(2)   Earnings before Interest, Taxes, Depreciation and Amortization, adjusted for certain items affecting comparability. See reconciliations of non-GAAP measures in the financial statements following this release.

CEO's Remarks:
"We are pleased with our results for the quarter, which reflect the strength of our brands, the dedication of our team and independent distributor partners, and the ongoing restructuring efforts under Project Centennial," said Allen Shiver, Flowers Foods president and CEO. "Strong demand for Dave's Killer Bread and outstanding execution and service in the marketplace drove growth in sales and market share during the quarter. Earnings were impacted by expected strategic charges that allow us to lower our cost structure and streamline our company, increase focus on our strongest brands, and improve our supply chain. Excluding these charges, our profitability in the third quarter was solid, driven by improved manufacturing efficiencies and enhanced cost discipline across the company. Through Project Centennial, we are making substantial progress and building momentum to achieve the underlying earnings potential of the business."

Mr. Shiver continued, "Our strategic objectives are on track, and the progress we are making is encouraging. We are capturing savings through organizational efficiencies and reduced spending on purchased goods and services. Our focus on productivity and continuous improvement is delivering improved efficiencies. We are streamlining our product assortment, reducing complexity in the marketplace and in our bakeries. With our increased focus on innovation and product differentiation, our team is developing a robust innovation pipeline to drive brand growth. I am confident the changes we are making will build shareholder value over the long term."

Guidance for Fiscal 2017:

  • The company continues to expect sales to be in the range of $3.888 billion to $3.927 billion, a year-over-year change of approximately -1.0% to 0.0%.
  • The company continues to expect fiscal 2017 adjusted diluted EPS to be in the range of $0.85 to $0.90, excluding the matters affecting comparability listed below:

 




Reconciliation of Earnings per Share -
Full Year Fiscal 2017 Guidance




Range Estimate







Net income per diluted common share


$                 0.47

to

$                 0.51

Gain on sale of Specialty Blending


(0.09)


(0.09)

Project Centennial consulting costs


0.11


0.12

Restructuring and related impairments


0.29


0.29

Pension plan settlement loss


0.01


0.01

Multi-employer pension plan withdrawal costs


0.05


0.05

Lease terminations and legal settlement


0.01


0.01

Adjusted net income per diluted common share


$                 0.85

to

$                 0.90

Update on Strategic Priorities:
The company continued to deliver on its strategic priorities under Project Centennial. During the third quarter, notable accomplishments included:

  • Generating Fuel for Growth: On track to achieve fiscal 2018 gross savings goal of $70 million to $80 million, relative to fiscal 2016, continued transition to the new organizational structure and completed the voluntary separation incentive program, conducted "lean" events at bakeries to drive continuous improvement in operations, performed regional scenario analysis to better optimize the manufacturing network, and moved forward with initiatives to reduce purchased goods and services spending.
  • Reinvigorating the Core Business: Streamlined retail product assortment to reduce merchandising complexity and improve manufacturing efficiencies, and utilized a third-party distribution platform to expand distribution of products in the upper Midwest.

Third Quarter Matters Affecting Comparability:
In the third quarter of 2017, the company recorded Project Centennial consulting costs of $7.1 million, restructuring and related impairment charges of $100.5 million, a legal settlement of $4.3 million, pension plan settlement loss of $3.0 million, and MEPP withdrawal costs of $18.3 million. In the prior year quarter, the company recorded Project Centennial consulting costs of $1.2 million, legal settlements and related tax liabilities of $1.3 million, loss on extinguishment of debt of $1.9 million, and a pension plan settlement loss of $1.8 million.

 Reconciliation of Earnings (Loss) per Share to Adjusted Earnings per Share 








 For the Twelve Weeks Ended 



 Oct 7, 2017 


 Oct 8, 2016 






Net income (loss) per diluted common share

$          (0.16)


$             0.19

Project Centennial consulting costs

0.02


-

Restructuring and related impairment charges

0.29


-

Legal settlements

0.01


-

Loss on extinguishment of debt

-


0.01

Pension plan settlement loss

0.01


0.01

Multi-employer pension plan withdrawal costs

0.05


-

Adjusted net income per diluted common share

$            0.23


$             0.21






Certain amounts may not compute due to rounding.

For the remainder of fiscal 2017, the company expects Project Centennial consulting costs to be in the range of $5.5 million to $6.5 million.

Consolidated Third Quarter 2017 Summary
Compared to the prior year third quarter where applicable

  • Sales increased 1.5% to $932.8 million.
  • Percentage point change in sales attributed to:
    • Pricing/mix: -0.6%
    • Volume: 2.7%
    • Divestiture: -0.6%
  • Net income decreased $73.8 million to a loss of $33.6 million. Excluding matters affecting comparability, adjusted net income increased 9.7% to $48.3 million.
  • Operating income decreased $119.9 million to a loss of $53.8 million. Excluding matters affecting comparability, adjusted operating income increased 12.7% to $79.4 million.
  • Adjusted EBITDA increased 9.1% to $112.4 million, or 12.0% of sales, an 80 basis point increase.
  • Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 51.0% of sales, a 90 basis point improvement, primarily driven by fewer outside purchases of product, and improved manufacturing efficiencies.
  • Selling, distribution and administrative (SD&A) expenses were 38.1% of sales, a 90 basis point increase driven primarily by incremental Project Centennial consulting costs and legal settlement charges.
  • Restructuring and related impairment charges, MEPP withdrawal costs, and pension plan settlement loss were $121.8 million.
  • Depreciation and amortization (D&A) expenses were $33.0 million, 3.5% of sales, flat when compared to the prior year quarter.

Continued sales growth from branded organic products and expansion markets, and to a much lesser extent, increased volume due to the impact of two hurricanes during the quarter, resulted in the sales increase, partially offset by the divestiture of a mix manufacturing business in January 2017 and by a competitive marketplace. Sales of DKB branded products continue to increase, partly due to the introduction of breakfast items in the second quarter of the year.

On a consolidated basis, branded retail sales increased 3.0% to $550.8 million and store branded retail sales increased 1.1% to $138.6 million, while non-retail and other sales decreased 1.4% to $243.4 million. The sales increase in the branded retail category resulted primarily from increased sales of branded organic products, partially offset by softer sales of branded buns and rolls. Store branded retail sales increased primarily as a result of volume increases in buns and rolls. The impact of the mix manufacturing divestiture, somewhat offset by volume growth in vending sales, principally resulted in the decrease of non-retail and other sales, which includes contract manufacturing, vending and foodservice.

DSD Segment Summary
Compared to the prior year third quarter where applicable

  • Sales increased 2.4% to $787.3 million
  • Percentage point change in sales attributed to:
    • Pricing/mix: 1.4%
    • Volume: 1.0%
  • Operating income decreased $86.6 million to a loss of $20.2 million. Excluding matters affecting comparability, adjusted operating income increased 16.8% to $78.9 million.
  • Adjusted EBITDA increased 12.3% to $107.2 million, or 13.6% of sales, a 120 basis point increase.
  • Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 47.2% of segment sales, a 70 basis point improvement, primarily driven by sales increases due to improved pricing/mix.
  • SD&A expenses were 39.7% of segment sales, a 10 basis points decrease. This decrease was primarily driven by lower workforce-related costs and cost savings initiatives, partially offset by higher distribution fees due to a larger portion of sales being sold by independent distributors, and a higher legal settlement charge incurred during the quarter.
  • Restructuring and related impairment charges and MEPP withdrawal costs were $94.9 million.
  • D&A expenses were $28.3 million.

DSD segment branded retail sales increased 3.7% to $514.6 million and store branded retail sales increased 0.2% to $110.8 million, while non-retail and other sales were unchanged at $161.9 million.

Branded retail sales increased due to significant sales growth for branded organic products and, to a lesser extent, increased volume related to the impact of two hurricanes during the current quarter, somewhat offset by declines in branded buns and rolls. Sales of DKB branded products continue to increase, driven by volume gains and the addition of DKB breakfast items in the second quarter of the year. Store branded retail and non-retail and other sales were relatively unchanged quarter over quarter.

Warehouse Segment Summary
Compared to the prior year third quarter where applicable

  • Sales decreased 2.9% to $145.6 million.
  • Percentage point change in sales attributed to:
    • Pricing/mix: -6.8%
    • Volume: 7.3%
    • Divestiture: -3.4%
  • Operating income decreased $21.4 million to a loss of $9.1 million. Excluding matters affecting comparability, adjusted operating income decreased 10.6% to $11.0 million.
  • Adjusted EBITDA decreased 6.6% to $15.8 million, 10.8% of sales, a 50 basis point decline.
  • Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 71.9% of segment sales, a 30 basis point improvement, primarily driven by lower outside purchases of product, and increased production for the DSD segment, partially offset by sales declines.
  • SD&A expenses were 17.2% of segment sales, a 70 basis point increase. This increase was primarily driven by significantly lower sales that spread the costs over a smaller sales base, as well as increased marketing expenses.
  • Restructuring costs and related impairment charges were $20.1 million.
  • D&A expenses were $4.8 million.

Branded retail sales declined 5.5% to $36.2 million and store branded retail sales increased 5.0% to $27.8 million, while non-retail and other sales decreased 4.1% to $81.5 million. Branded retail sales decreased largely due to declines in branded cake and to a lesser extent warehouse-delivered branded organic bread. Branded cake sales were negatively impacted by increased competition quarter over quarter. Volume increases in store branded items due to a new customer resulted in the increase in store branded retail sales. The decrease in non-retail and other sales, which include contract manufacturing, vending and foodservice, was due primarily to the impact of the mix manufacturing divestiture and to a lesser extent lost contract manufacturing business, partially offset by growth in vending volume.

Unallocated Corporate Expense Summary
Note: Comparisons are to consolidated sales

  • SD&A expenses increased 70 basis points to 1.9% of consolidated sales, including incremental Project Centennial consulting costs of $5.8 million, or 60 basis points as a percent of sales.
  • Restructuring and related impairment charges and pension plan settlement loss were $6.9 million.

Cash Flow, Capital Allocation, and Capital Return
In the third quarter of fiscal 2017, cash flow from operating activities was $50.4 million, capital expenditures were $19.3 million, and dividends paid were $35.6 million. During the quarter, the company had a net increase in debt and capital lease obligations of $6.9 million.

The company did not repurchase any shares of its common stock during the period. There are 6.6 million shares remaining under the company's current share repurchase plan. As in the past, the company expects to continue to make opportunistic share repurchases under this plan.

Conference Call
Flowers Foods will hold a conference call to discuss its third quarter 2017 results at 8:30 a.m. (Eastern) on November 9, 2017. The call can be accessed by following the webcast link on flowersfoods.com. 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 2016 sales of $3.9 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, Tastykake, and Dave's Killer Bread. 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) general economic and business conditions and the 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) our ability to successfully implement our business strategies, including those strategies the company has initiated under Project Centennial, which may involve, among other things, the integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values, the deployment of new systems and technology and an enhanced organizational structure, (j) consolidation within the baking industry and related industries, (k) 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, (l) increasing legal complexity and legal proceedings that we are or may become subject to, and (m) 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 public 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 EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted operating income by segment, adjusted EBIT by segment, adjusted EPS, adjusted selling, distribution and administrative expenses (SD&A), gross margin excluding depreciation and amortization and the ratio of net debt to adjusted EBITDA. The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure. The company's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

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. EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation Plan. 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.

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.

The company defines adjusted EBITDA, adjusted EBIT, adjusted net income, adjusted operating income, adjusted operating income by segment, adjusted EBIT by segment, and adjusted net income per diluted share, respectively, excluding the impact of asset impairment charges, acquisition-related costs, and pension plan settlements.  The company believes that these measures, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges.

Net debt to EBITDA is used as a measure of financial leverage employed by the company. 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.

The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure.

Flowers Foods, Inc.

Consolidated Statement of Operations

(000's omitted, except per share data)



























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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016

Sales

$

932,822

$

918,791

$

3,047,110

$

3,058,168

Materials, supplies, labor and other production costs (exclusive of
depreciation and amortization shown separately below)


476,170


476,760


1,552,263


1,575,905

Selling, distribution and administrative expenses


355,599


341,538


1,171,062


1,124,473

Gain on divestiture


-


-


(28,875)


-

Restructuring and related impairment charges


100,549


-


100,549


-

Multi-employer pension plan withdrawal costs


18,268


-


18,268


-

Pension plan settlement loss


3,030


1,832


3,030


6,473

Depreciation and amortization


32,972


32,530


114,288


108,595

Income (loss) from operations 


(53,766)


66,131


116,525


242,722

Interest expense, net


2,730


4,683


11,056


10,471

Income (loss) before income taxes 


(56,496)


61,448


105,469


232,251

Income tax expense (benefit)


(22,925)


21,232


33,882


81,517

Net income (loss)

$

(33,571)

$

40,216

$

71,587

$

150,734












Net income (loss) per diluted common share

$

(0.16)

$

0.19

$

0.34

$

0.72












Diluted weighted average shares outstanding


209,606


208,944


210,231


210,564

 

 

Flowers Foods, Inc.

Segment Reporting

(000's omitted)





















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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016

Sales:









   Direct-Store-Delivery

$

787,255

$

768,920

$

2,580,007

$

2,553,690

   Warehouse Delivery


145,567


149,871


467,103


504,478


$

932,822

$

918,791

$

3,047,110

$

3,058,168



















Gain on Divestiture:









   Warehouse Delivery

$

-

$

-

$

(28,875)

$

-


$

-

$

-

$

(28,875)

$

-



















Restructuring and related impairment charges:









   Direct-Store-Delivery

$

76,625

$

-

$

76,625

$

-

   Warehouse Delivery 


20,091


-


20,091


-

   Unallocated Corporate 


3,833


-


3,833


-


$

100,549

$

-

$

100,549

$

-



















Multi-employer pension plan withdrawal costs:









   Direct-Store-Delivery

$

18,268

$

-

$

18,268

$

-


$

18,268

$

-

$

18,268

$

-



















Pension plan settlement loss:









   Unallocated Corporate 

$

3,030

$

1,832

$

3,030

$

6,473


$

3,030

$

1,832

$

3,030

$

6,473



















EBITDA (loss) income:









   Direct-Store-Delivery

$

8,047

$

94,183

$

245,422

$

331,321

   Warehouse Delivery 


(4,313)


16,896


63,043


62,224

   Unallocated Corporate 


(24,528)


(12,418)


(77,652)


(42,228)


$

(20,794)

$

98,661

$

230,813

$

351,317



















Depreciation and Amortization:









   Direct-Store-Delivery

$

28,286

$

27,852

$

98,703

$

92,906

   Warehouse Delivery


4,769


4,585


15,841


15,462

   Unallocated Corporate


(83)


93


(256)


227


$

32,972

$

32,530

$

114,288

$

108,595



















EBIT (loss) income:









   Direct-Store-Delivery 

$

(20,239)

$

66,331

$

146,719

$

238,415

   Warehouse Delivery 


(9,082)


12,311


47,202


46,762

   Unallocated Corporate 


(24,445)


(12,511)


(77,396)


(42,455)


$

(53,766)

$

66,131

$

116,525

$

242,722

 

 

Flowers Foods, Inc.

Condensed Consolidated Balance Sheet

(000's omitted)
















October 7, 2017

Assets




     Cash and Cash Equivalents


$

7,074





     Other Current Assets



494,482





     Property, Plant & Equipment, net



735,927





     Distributor Notes Receivable (includes $22,465 current portion)



201,589





     Other Assets



30,303





     Cost in Excess of Net Tangible Assets, net



1,213,304





     Total Assets


$

2,682,679





Liabilities and Stockholders' Equity




     Current Liabilities


$

396,063





     Long-term Debt and Capital Leases (includes $12,469 current portion)


856,108





     Other Liabilities



238,534





     Stockholders' Equity



1,191,974





     Total Liabilities and Stockholders' Equity


$

2,682,679

 

 

Flowers Foods, Inc.

Condensed Consolidated Statement of Cash Flows

(000's omitted)
























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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016

Cash flows from operating activities:









Net income (loss)

$

(33,571)

$

40,216

$

71,587

$

150,734

Adjustments to reconcile net income (loss) to net cash









  from operating activities:










Total non-cash adjustments


118,875


43,125


181,049


133,087


Changes in assets and liabilities and pension contributions


(34,948)


7,185


(41,384)


2,002

Net cash provided by operating activities


50,356


90,526


211,252


285,823

Cash flows from investing activities:










Purchase of property, plant and equipment 


(19,294)


(25,678)


(51,213)


(67,400)


Divestiture of assets


-


-


41,230


-


Other


(589)


6,242


9,953


11,902

Net cash disbursed for investing activities


(19,883)


(19,436)


(30)


(55,498)

Cash flows from financing activities:










Dividends paid


(35,606)


(33,199)


(105,207)


(97,808)


Exercise of stock options


2,880


8,384


9,296


18,862


Stock repurchases, including accelerated stock repurchases


-


-


(2,671)


(126,298)


Net change in debt borrowings


6,850


(46,608)


(101,250)


(22,858)


Other


(4,702)


(3,724)


(10,726)


(9,066)

Net cash disbursed for financing activities


(30,578)


(75,147)


(210,558)


(237,168)

Net increase (decrease) in cash and cash equivalents


(105)


(4,057)


664


(6,843)

Cash and cash equivalents at beginning of period


7,179


11,592


6,410


14,378

Cash and cash equivalents at end of period

$

7,074

$

7,535

$

7,074

$

7,535

 

 

Flowers Foods, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(000's omitted, except per share data)















Reconciliation of Earnings (Loss) per Share to Adjusted 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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Net income (loss) per diluted common share


$                    (0.16)


$                      0.19


$                      0.34


$                      0.72


Gain on divestiture


-


-


(0.09)


-


Restructuring and related impairment charges


0.29


-


0.29


-


Lease terminations/legal settlement/extinguishment loss


0.01


0.01


0.02


0.01


Project Centennial consulting costs


0.02


-


0.09


0.01


Pension plan settlement loss


0.01


0.01


0.01


0.02


Multi-employer pension plan withdrawal costs


0.05


-


0.05


-


Adjusted net income per diluted common share


$                      0.23


$                      0.21


$                      0.72


$                      0.75


Certain amounts may not add due to rounding.
























Reconciliation of Gross Margin









For the 12 Week
Period Ended


For the 12 Week
Period Ended









October 7, 2017


October 8, 2016

















Sales


$               932,822


$               918,791






Materials, supplies, labor and other production costs (exclusive of depreciation and amortization)


476,170


476,760






Gross Margin excluding depreciation and amortization


456,652


442,031






Less depreciation and amortization for production activities


19,553


19,807






Gross Margin


$               437,099


$               422,224

















Depreciation and amortization for production activities


$                 19,553


$                 19,807






Depreciation and amortization for selling, distribution and administrative activities


13,419


12,723






Total depreciation and amortization


$                 32,972


$                 32,530




















Reconciliation of Net Income (Loss) to Adjusted EBIT and 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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Net income (loss)


$               (33,571)


$                 40,216


$                 71,587


$               150,734


Income tax expense (benefit)


(22,925)


21,232


33,882


81,517


Interest expense, net


2,730


4,683


11,056


10,471


Earnings (loss) before interest and income taxes


(53,766)


66,131


116,525


242,722


Gain on divestiture


-


-


(28,875)


-


Lease terminations and legal settlement


4,253


1,250


5,068


1,250


Project Centennial consulting costs


7,050


1,219


31,845


2,475


Restructuring and related impairment charges


100,549


-


100,549


-


Multi-employer pension plan withdrawal costs


18,268


-


18,268


-


Pension plan settlement loss


3,030


1,832


3,030


6,473


Adjusted EBIT


79,384


70,432


246,410


252,920


Depreciation and amortization


32,972


32,530


114,288


108,595


Lease termination depreciation impact


-


-


(1,844)


-


Adjusted EBITDA


$               112,356


$               102,962


$               358,854


$               361,515













Sales


$               932,822


$               918,791


$           3,047,110


$           3,058,168


Adjusted EBITDA margin


12.0%


11.2%


11.8%


11.8%
















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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Adjusted EBITDA


$               112,356


$               102,962


$               358,854


$               361,515


Adjustments to reconcile net income (loss) to net cash provided by operating activities


85,903


10,595


66,761


24,492


Changes in assets and liabilities and pension contributions


(34,948)


7,185


(41,384)


2,002


Income tax (expense) benefit


22,925


(21,232)


(33,882)


(81,517)


Interest expense, net


(2,730)


(4,683)


(11,056)


(10,471)


Gain on divestiture


-


-


28,875


-


Lease terminations and legal settlement


(4,253)


(1,250)


(3,224)


(1,250)


Project Centennial consulting costs


(7,050)


(1,219)


(31,845)


(2,475)


Restructuring and related impairment charges


(100,549)


-


(100,549)


-


Multi-employer pension plan withdrawal costs


(18,268)


-


(18,268)


-


Pension plan settlement loss


(3,030)


(1,832)


(3,030)


(6,473)


Cash Flow From Operations


$                 50,356


$                 90,526


$               211,252


$               285,823
















Reconciliation of Income Tax Expense (Benefit) to Adjusted Income Tax Expense





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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Income tax expense (benefit)


$               (22,925)


$                 21,232


$                 33,882


$                 81,517


Tax impact of:










Gain on divestiture


-


-


(11,117)


-


Lease terminations and legal settlement


1,638


481


1,952


481


Project Centennial consulting costs


2,714


469


12,260


953


Loss on extinguishment of debt


-


732


-


732


Restructuring and related impairment charges


38,711


-


38,711


-


Multi-employer pension plan withdrawal costs


7,033


-


7,033


-


Pension plan settlement loss


1,167


705


1,167


2,492


Adjusted income tax expense


$                 28,338


$                 23,619


$                 83,888


$                 86,175
















Reconciliation of Net Income (Loss) 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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Net income (loss)


$               (33,571)


$                 40,216


$                 71,587


$               150,734


Gain on divestiture


-


-


(17,758)


-


Lease terminations and legal settlement


2,615


769


3,116


769


Project Centennial consulting costs


4,336


750


19,585


1,522


Loss on extinguishment of debt


-


1,168


-


1,168


Restructuring and related impairment charges


61,838


-


61,838


-


Multi-employer pension plan withdrawal costs


11,235


-


11,235


-


Pension plan settlement loss


1,863


1,127


1,863


3,981


Adjusted net income


$                 48,316


$                 44,030


$               151,466


$               158,174
















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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Earnings (loss) before interest and income taxes


$               (20,239)


$                 66,331


$               146,719


$               238,415


Lease terminations and legal settlement


4,253


1,250


5,068


1,250


Restructuring and related impairment charges


76,625


-


76,625


-


Multi-employer pension plan withdrawal costs


18,268


-


18,268


-


Adjusted EBIT


78,907


67,581


246,680


239,665


Depreciation and amortization


28,286


27,852


98,703


92,906


Depreciation on lease terminations


-


-


(1,844)


-


Adjusted EBITDA


$               107,193


$                 95,433


$               343,539


$               332,571













Sales


$               787,255


$               768,920


$           2,580,007


$           2,553,690


Adjusted EBITDA margin


13.6%


12.4%


13.3%


13.0%
















Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Warehouse Delivery





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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













Earnings (loss) before interest and income taxes


$                 (9,082)


$                 12,311


$                 47,202


$                 46,762


Gain on divestiture


-


-


(28,875)


-


Restructuring and related impairment charges


20,091


-


20,091


-


Adjusted EBIT


11,009


12,311


38,418


46,762


Depreciation and amortization


4,769


4,585


15,841


15,462


Adjusted EBITDA


$                 15,778


$                 16,896


$                 54,259


$                 62,224













Sales


$               145,567


$               149,871


$               467,103


$               504,478


Adjusted EBITDA margin


10.8%


11.3%


11.6%


12.3%
















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 7, 2017


October 8, 2016


October 7, 2017


October 8, 2016













EBIT


$               (24,445)


$               (12,511)


$               (77,396)


$               (42,455)


Project Centennial consulting costs


7,050


1,219


31,845


2,475


Pension plan settlement loss


3,030


1,832


3,030


6,473


Restructuring and related impairment charges


3,833


-


3,833


-


Adjusted EBIT


$               (10,532)


$                 (9,460)


$               (38,688)


$               (33,507)


Depreciation and amortization


(83)


93


(256)


227


Adjusted EBITDA


$               (10,615)


$                 (9,367)


$               (38,944)


$               (33,280)
















Reconciliation of Earnings per Share - Full
Year Fiscal 2017 Guidance









Range Estimate

















Net income per diluted common share


$                      0.47

to

$                      0.51






Gain on sale of Specialty Blending


(0.09)


(0.09)






Project Centennial consulting costs


0.11


0.12






Restructuring and related impairments


0.29


0.29






Pension plan settlement loss


0.01


0.01






Multi-employer pension plan withdrawal costs


0.05


0.05






Lease terminations and legal settlement


0.01


0.01






Adjusted net income per diluted common share


$                      0.85

to

$                      0.90






 

 

Flowers Foods, Inc.

Sales Bridge




























Net


Total Sales


For the 12 Week Period Ended October 7, 2017

Volume

Price/Mix

Divestiture

Change








Direct-Store-Delivery

1.0%

1.4%

0.0%

2.4%








Warehouse Delivery

7.3%

-6.8%

-3.4%

-2.9%








Total Flowers Foods

2.7%

-0.6%

-0.6%

1.5%


































Net


Total Sales


For the 40 Week Period Ended October 7, 2017

Volume

Price/Mix

Divestiture

Change








Direct-Store-Delivery

0.3%

0.7%

0.0%

1.0%








Warehouse Delivery

-1.9%

-2.6%

-2.9%

-7.4%








Total Flowers Foods

-0.3%

0.4%

-0.5%

-0.4%








 

View original content:http://www.prnewswire.com/news-releases/flowers-foods-inc-reports-third-quarter-2017-results-300552365.html

SOURCE Flowers Foods, Inc.

Investor Contact: J.T. Rieck (229) 227-2253; Media Contact: Paul Baltzer (229) 227-2380


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