Flowers '12 profits up; deferring '13 guidance

by Eric Schroeder
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THOMASVILLE, GA. — Net income at Flowers Foods, Inc. in the year ended Dec. 29, 2012, was $136,121,000, equal to 98c per share on the common stock, up 10% from $123,428,000, or 90c per share, in fiscal 2011. Adjusted for one-time charges, fiscal 2012 e.p.s. was $1.03, up 7% from 96c in fiscal 2011.

Sales in the year were $3,046,491,000, up 10% from $2,773,356,000 in fiscal 2011. Flowers said the increase was attributable to higher volume of 2.1 percentage points and favorable pricing/mix of 1.5 percentage points. Additionally, the acquisitions of Tasty Baking Co. and Lepage Bakeries contributed 6.2 percentage points.

“Price/mix and volume increased across all channels,” Flowers said. “The volume increase was driven by branded soft variety bread, branded cake, store brand bread, buns and rolls, and food service. These increases were partially offset by volume decreases in store brand cake.”

Flowers said sales of its Nature’s Own brand reached approximately $974 million in fiscal 2012, up from $935 million in fiscal 2011.

For the fourth quarter ended Dec. 29, net income was $38,567,000, or 28c per share, up 67% from $23,038,000, or 17c per share, in the same period a year ago. Sales rose 15% to $749,442,000 from $653,566,000.

“The year 2012 was eventful for Flowers Foods and for our industry,” said George E. Deese, chairman and chief executive officer. “We cycled our acquisition of Tasty Baking in the second quarter, acquired Lepage Bakeries in the third quarter, and announced an agreement to acquire the rights to Sara Lee and Earthgrains brands in California in the fourth quarter. In mid-November, our industry experienced another major change when Hostess Brands exited the marketplace. Our team rallied to meet the needs of new and existing customers as they felt the impact of Hostess’ sudden departure. Our fourth-quarter results show the benefit to sales and earnings that resulted from our team’s outstanding efforts to serve our customers.

“The marketplace remains in flux as the industry awaits the outcome of Hostess’ bankruptcy proceedings and the resulting auctions of assets. We are delaying offering specific guidance for 2013 until we have more clarity regarding the Hostess situation as well as our pending transaction for the Sara Lee and Earthgrains brands in California.

“Our team continues to execute well on our operating strategies, and we do anticipate that sales and earnings for 2013 will meet or exceed our long-term objectives for 5% to 10% sales growth and double-digit earnings-per-share growth, excluding one-time charges.”

Gross margin as a per cent of sales for fiscal 2012 was 46.9%, which was flat compared with fiscal 2011. Higher ingredient costs as a per cent of sales were offset by lower workforce-related costs as a per cent of sales, production volume increases and increased manufacturing efficiencies, Flowers said.

Selling, distribution and administrative costs as a per cent of sales for the year were 36.4%, which compared with 36.7% in fiscal 2011. Flowers said one-time acquisition costs of $9.6 million negatively impacted selling, distribution and administrative costs 30 basis points as a per cent of sales during fiscal 2012. By comparison, in fiscal 2011 costs were affected negatively by one-time plant closings and acquisition-related costs of $8.3 million.

The Flowers Direct-Store-Delivery segment had full-year EBIT of $233,196,000, up 15% from $203,248,000 in fiscal 2011. Sales for the division were $2,508,856,000, up 11% from $2,265,244,000. Volume increased 1.5%, while price/mix lifted sales 1.6% and acquisitions boosted sales 7.7%.

The Warehouse Delivery segment of Flowers had full-year EBIT of $36,230,000, up 32% from $27,351,000. Sales were $537,635,000, up nearly 6% from $508,112,000. Volume increased 3.6%, while price/mix lifted sales 2.2%.

Flowers on Jan. 11 was named the stalking horse bidder for certain bread bakeries and bread brands of Hostess Brands, Inc., Irving, Texas. A competitive auction is scheduled for Feb. 28, followed by a sale hearing set for March 5. If Flowers’ bids are approved, the transactions will remain subject to regulatory clearance.

Meanwhile, Flowers’ acquisition of the Sara Lee and Earthgrains brands for sliced bread, buns and rolls in California is scheduled to be finalized on Feb. 23.

The company has delayed offering specific guidance for fiscal 2013 until it has more clarity on the transactions.
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