NEW YORK — In addition to giving the company a leg up in the fast growing market for organic products, the acquisitions of Dave’s Killer Bread and Alpine Valley Bread Co. may help Flowers Foods, Inc. in its efforts to expand its geographic footprint, according to recent analysis by Standard & Poor’s Ratings Services.
“The recently announced acquisitions of Dave's Killer Bread and Alpine Valley Bread Co. will further enhance geographic reach into the Northwest and Southwest regions of the U.S., respectively, and provide entry into the faster-growing organic bread category,” S.&P. said as part of a recent ratings upgrade.
Based on success the company already has had moving into new geographic markets, integrating its major Hostess acquisition and adding faster-growing products to its portfolio, the ratings agency raised all credit ratings for Flowers, including the corporate credit rating, which was raised to BBB from BBB-. The outlook for the ratings is stable.
S.&P. assigns BBB to companies with “adequate protection parameters.” BBB and BBB+ represent the highest credit ratings before moving into the A, AA and AAA family of highest ratings.
The stable outlook represents the agency’s view that Flowers will continue to make acquisitions but will maintain credit metrics consistent with S.&P.’s forecast.
“The upgrade reflects Flowers Foods’ successful execution of its domestic geographic expansion and growth strategy while demonstrating a track record of deleveraging following acquisitions to maintain financial metrics well below 3 times on a sustainable basis over our forecast horizon,” said Bea Chiem, a credit analyst with Standard & Poor's.
The agency credited Flowers with paying down roughly $300 million in debt using internal cash flows while successfully integrating its 2013 acquisition of the bread assets of Hostess Brands, Inc.
“The acquisition improved geographical diversity, grew the company’s scale, and strengthened its brand portfolio because it added a well-known brand (Wonder Bread), increased revenues by double digits, and increased the company’s geographic footprint from the East Coast of the U.S. into the Midwest and California,” S.&P. said.
S.&P. estimated Flowers’ adjusted debt as of mid-July at about $1 billion.
