THOMASVILLE, Ga., May 25 /PRNewswire-FirstCall/ -- Flowers Foods
(NYSE: FLO) today reported sales of $563.6 million for its 16-week first
quarter ended April 22, 2006, an 11.4% increase over the $506.0 million
reported for the first quarter last year. Net income for the quarter was $22.9
million, an increase of 14.6% over the $20.0 million reported for the first
quarter of 2005. Income from continuing operations before cumulative effect of
a change in accounting principle was $22.3 million, an increase of 11.3% over
the $20.0 million reported a year ago. Diluted net income per share from
continuing operations before cumulative effect of a change in accounting
principle was $.36, an increase of 16.1% over the $.31 per share reported for
the first quarter of 2005.
"Flowers Bakeries performed very well during the quarter, benefiting from
our Nature's Own core items, which achieved double digit increases. Sales of
Nature's Own Whitewheat breads also were strong and we extended the brand
during the quarter with the introduction of Whitewheat hamburger and hotdog
buns," said George E. Deese, chairman, chief executive officer and president.
"Expansion of our direct-store-delivery (DSD) territories and the integration
of Derst Baking Company, which was acquired in February 2006, continue to
progress. We see additional growth opportunities as a result of changes in the
competitive landscape. Flowers Specialty results were disappointing due to the
challenges of shifting from contract production to branded retail snack cakes,
including the cost of relocating our primary snack cake distribution center.
Flowers Specialty's frozen bread business had a tough comparison due to the
successful product launch by a national foodservice customer in the first
quarter last year."
The sales increase of 11.4% resulted from favorable pricing of 7.3% and a
positive mix shift of 4.7%, offset slightly by a volume decline of 0.6%.
During the quarter, Bakeries Group sales increased 13.3% due to a volume
increase of 7.4%, favorable pricing of 5.5%, and a 0.4% favorable product mix
shift. The volume growth was driven by branded white bread, including Nature's
Own Whitewheat, and Nature's Own soft variety bread, both of which achieved
double-digit growth. The acquisition of Derst Baking Company added 1.7%, and
DSD expansion markets were 0.8% of the increase. Flowers Specialty sales
increased 4.2%, driven by favorable pricing of 12.3% and a positive mix shift
of 4.0%. These increases were negatively impacted by a 12.1% volume decline in
the quarter. The loss of contract snack cake production more than offset the
gains in sales of retail branded snack cake, the 1.0% sales increase due to
the acquisition of Royal Cake Company (acquired September 2005), and increases
in foodservice frozen bread sales.
Gross margin improved to 50.4% of sales from 50.1% primarily due to
pricing gains, a positive mix shift, and lower ingredient and packaging costs,
which were partially offset by higher energy costs.
Selling, marketing and administrative cost as a percentage of sales for
the first quarter was 40.9% compared with 40.3% in the prior year's first
quarter. The increase for the quarter was due to higher labor costs, including
the cost to relocate the snack cake distribution center, and higher stock-
based compensation expense. Increased distribution expense also was a factor
as snack cake sales from contract production, where customers bear the
distribution cost, shifted to branded retail sales, where distribution costs
are incurred by the company. The increased distribution costs resulting from
this shift were further impacted by higher energy costs year over year.
The company adopted SFAS 123R, "Share-Based Payment" (SFAS 123R) in the
first quarter. Stock-based compensation expense increased $3.7 million, or
$.04 per share, for the quarter compared with the first quarter of 2005. Of
this increase, $1.8 million, or $.02 per share, is the result of the company's
adoption of SFAS 123R. As previously disclosed, the company estimates the
incremental effect of SFAS 123R on fiscal 2006 will be $.05 to $.06 per share.
As a result of the adoption of SFAS 123R, the company recorded as an expense a
cumulative effect of change in accounting principle of $0.6 million, net of
tax. The company revalued its liability related to certain outstanding stock-
based awards as of the date of adoption of SFAS 123R at fair value.
The company reported a gain of $0.7 million in the first quarter from
insurance proceeds received due to equipment damaged by a fire at the
company's Montgomery, Ala., facility. This equipment has been replaced and the
production line is in full operation. Other expenses incurred in the first
quarter of $0.6 million related to the Montgomery fire are currently under
review by the insurance carrier. No additional insurance proceeds from
outstanding claims related to Hurricane Katrina were received during the first
quarter; however, the company continues to pursue hurricane-related claims
with its insurance carriers.
Depreciation and amortization expense for the quarter was relatively flat
as a percentage of sales quarter to quarter. Net interest income for the
quarter was $1.5 million compared with $2.1 million in the first quarter last
year due to higher interest expense on borrowings under the company's credit
facility. The effective tax rate for continuing operations for the quarter was
37.4%. The tax rate was down from last year's first quarter primarily due to a
decline in state income taxes resulting from an unfavorable state tax audit
adjustment in the first quarter of 2005 of $0.6 million.
The company reported income from discontinued operations in the quarter of
$1.2 million, net of tax. During the quarter, the company received insurance
proceeds to offset a portion of the previously reported loss related to a
lawsuit concerning pie shells produced at a bakery once owned by the company.
During the first quarter, the company acquired 1.1 million shares of its
common stock for $31.0 million, an average of $27.69 per share. Since
inception of the stock repurchase plan and through the first quarter of fiscal
2006, the company has acquired 10.6 million shares of its common stock
totaling $214.5 million, an average of $20.33 per share. The plan authorizes
the company to repurchase up to 15.3 million shares of common stock.
Cash flow from operations remained strong at $46.4 million for the
quarter, supporting the company's stock repurchases, capital expenditures,
acquisitions, and dividend payments. "This company's ability to generate cash
is one of our greatest strengths," said Deese. "We anticipate strong cash flow
for the remainder of the year that will allow us to continue investing in the
company and building value for our shareholders."
The company confirms its prior annual guidance for fiscal 2006,
anticipating sales growth of 9.0% to 10.4%, or $1.870 billion to $1.895
billion. Income from continuing operations before cumulative effect of a
change in accounting principle, exclusive of any additional insurance
proceeds, is expected to be 3.6% to 4.0% of sales, or $68.6 million to $74.0
million. With approximately 62.0 million shares outstanding, income per share
from continuing operations before cumulative effect of a change in accounting
principle is expected to be $1.10 to $1.19, an increase of 11% to 20% over
fiscal 2005. Capital spending in fiscal 2006 is estimated to be $58 million to
$63 million, reflecting the company's previously announced plans to expand
production capacity to meet the demands of the market.
The board of directors will consider the dividend at its regularly
scheduled meeting. Any action taken will be announced following that meeting.
Flowers Foods will broadcast its quarterly conference call over the
Internet at 9:00 a.m. (Eastern) May 25, 2006. The call will be broadcast live
on Flowers' Web site, www.flowersfoods.com, and can be accessed by clicking on
the web cast link on the home page. The call also will be archived on the
company's website.
Company Information
Headquartered in Thomasville, Ga., Flowers Foods is one of the nation's
leading producers and marketers of packaged bakery foods for retail and
foodservice customers. Flowers operates 37 bakeries that produce a wide range
of bakery products marketed throughout the Southeastern, Southwestern, and
mid-Atlantic states via an extensive direct-store-delivery network and
nationwide through other delivery systems. Among the company's top brands are
Nature's Own, Cobblestone Mill, Sunbeam, BlueBird, and Mrs. Freshley's. 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 and (f) 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.
Flowers Foods
Consolidated Statement of Income
(000's omitted, except per share data)
For the 16 - Week For the 16 - Week
Period Ended Period Ended
April 22, 2006 April 23, 2005
Sales $563,613 $506,040
Materials, supplies, labor and other
production costs 279,335 252,764
Selling, marketing and administrative
expenses 230,779 203,991
Depreciation and amortization 18,826 17,740
Gain on insurance recovery (654) 0
Income from continuing operations
before interest, income taxes,
minority interest and cumulative
effect of a change in accounting
principle (EBIT) 35,327 31,545
Interest income, net 1,521 2,097
Income from continuing operations
before income taxes, minority
interest and cumulative effect of a
change in accounting principle (EBT) 36,848 33,642
Income tax expense 13,769 13,270
Income from continuing operations
before minority interest and
cumulative effect of a change in
accounting principle 23,079 20,372
Minority interest in variable
interest entity (819) (375)
Income from continuing operations
before cumulative effect of a change
in accounting principle 22,260 19,997
Income from discontinued operations,
net of tax 1,222 0
Income before cumulative effect of a
change in accounting principle 23,482 19,997
Cumulative effect of a change in
accounting principle, net of tax (568) 0
Net income $22,914 $19,997
Per share amounts:
Income from continuing operations
before cumulative effect of a
change in accounting principle $0.36 $0.31
Income from discontinued operations 0.02 0.00
Cumulative effect of a change in
accounting principle (0.01) 0.00
Net income $0.37 $0.31
Diluted weighted average shares
outstanding 62,026 65,553
Flowers Foods
Segment Reporting
(000's omitted)
For the 16 - Week For the 16 - Week
Period Ended Period Ended
April 22, 2006 April 23, 2005
Sales:
Flowers Bakeries Group $449,615 $396,674
Flowers Specialty Group 113,998 109,366
$563,613 $506,040
EBITDA from Continuing Operations
Before Cumulative Effect of a Change
in Accounting Principle:
Flowers Bakeries Group $53,763 $44,004
Flowers Specialty Group 9,018 12,927
Flowers Foods (8,628) (7,646)
$54,153 $49,285
Depreciation and Amortization:
Flowers Bakeries Group $14,878 $14,393
Flowers Specialty Group 4,040 3,343
Flowers Foods (92) 4
$18,826 $17,740
EBIT from Continuing Operations
Before Cumulative Effect of a Change
in Accounting Principle:
Flowers Bakeries Group $38,885 $29,611
Flowers Specialty Group 4,978 9,584
Flowers Foods (8,536) (7,650)
$35,327 $31,545
Flowers Foods
Condensed Consolidated Balance Sheet
(000's omitted)
April 22, 2006
Assets
Cash and Cash Equivalents $15,391
Other Current Assets 219,279
Property, Plant & Equipment, net 463,455
Distributor Notes Receivable
(includes $9,201 current portion) 80,713
Other Assets 27,606
Cost in Excess of Net Tangible
Assets, net 99,498
Total Assets $905,942
Liabilities and Stockholders' Equity
Current Liabilities $164,602
Bank Debt 52,700
Other Debt and Capital Leases (includes $4,914
current portion) 36,403
Other Liabilities 93,069
Minority Interest in Variable Interest Entity 5,456
Common Stockholders' Equity 553,712
Total Liabilities and Stockholders' Equity $905,942
Flowers Foods
Condensed Consolidated Statement of Cash Flows
(000's omitted)
For the 16 - Week
Period Ended
April 22, 2006
Cash flows from operating activities:
Net income $22,914
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 18,826
Minority interest in variable interest entity 819
Pension contributions (14,000)
Cumulative effect of a change in
accounting principle (SFAS 123R) 930
Stock compensation 3,170
Changes in assets and liabilities 13,785
Net cash provided by operating activities 46,444
Cash flows from investing activities:
Purchase of property, plant and equipment (15,198)
Acquisitions, net of cash acquired (878)
Other (4,508)
Net cash disbursed for investing activities (20,584)
Cash flows from financing activities:
Dividends paid (6,182)
Stock options exercised 5,348
Income tax benefit related to stock options exercised 7,185
Stock repurchases (31,028)
Decrease in book overdraft (3,182)
Proceeds from debt borrowings 106,700
Debt and capital lease obligation payments (100,311)
Net cash disbursed for financing activities (21,470)
Net increase in cash and cash equivalents 4,390
Cash and cash equivalents at beginning of period 11,001
Cash and cash equivalents at end of period $15,391
SOURCE Flowers Foods, Inc.
CONTACT: Jimmy M. Woodward, Senior VP and Chief Financial Officer,
+1-229-227-2266, or Marta J. Turner, Senior VP-Corporate Relations,
+1-229-227-2348, both of Flowers Foods, Inc.
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