THOMASVILLE, Ga., Nov. 7, 2018 /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 6,
2018.
Summary:
Compared to the prior year third quarter where applicable
- Sales decreased 1.0% to $923.4 million.
- Diluted EPS increased to $0.19 from a loss of $0.16.
- Adjusted diluted EPS (1) was unchanged at $0.23.
- Revised earnings guidance for fiscal 2018: The company now expects adjusted diluted EPS in the range of $0.90 to $0.95.
(1) See reconciliations of non-GAAP measures in the financial statements following this release.
CEO's Remarks
"In the third quarter, our strong brand portfolio achieved record market share. We also made additional organizational
changes designed to enhance performance and increase accountability," said Allen Shiver, Flowers
Foods' president and CEO. "We are continuing to take steps to optimize our supply chain, including the start-up of a high-speed
production bun line in Oxford, Pa., and the closing of an inefficient bakery in Brattleboro, Vt. Extending our portfolio into adjacent product segments is a strategic priority, and today,
we announced the acquisition of Canyon Bakehouse, a leading producer of gluten-free bakery products. Gluten-free is a growing
segment of the category, and one where we believe we can leverage our powerful distribution network to grow enterprise
value."
"Despite progress on our strategic priorities, we are not satisfied with our performance this quarter. We continue to face a
challenging operating environment that impacted our third quarter financial results and our full-year outlook. Sales in the
quarter were down, compared to the prior year, due to expected losses of low-margin foodservice business, lower hurricane-related
volumes, and disruptions related to inferior yeast. We expect these headwinds to be transitory. Also impacting results in the
quarter were inflationary cost pressures from commodities and transportation. We are working to address these higher costs
through pricing actions and our ongoing savings initiatives."
Mr. Shiver continued, "Flowers' competitive advantages lie in our leading brands, efficient bakeries, and flexible
distribution platform. Through our multi-year transformational plan, we intend to maximize these advantages to improve margins,
reinvigorate core brands, and grow profitably in adjacent product segments. We are on track to achieve the upper end of our gross
savings targets for 2018, and are confident that our plan will enable Flowers to achieve long-term success and deliver
sustainable, top-tier shareholder returns."
Revised Outlook for Fiscal 2018:
- Expected sales in the range of approximately $3.921 billion to $3.982
billion, representing growth of approximately 0.0% to 1.6%.
- Expected adjusted diluted EPS in the range of approximately $0.90 to $0.95, representing growth of approximately 1.1% to 6.7%. Previously the company had expected adjusted
diluted EPS in the range of $1.00 to $1.07.
- Adjusted EPS guidance excludes consulting and restructuring costs associated with Project Centennial, the company's
multi-year transformational plan, which are expected to be in the range of $13 million to
$15 million, and costs associated with matters affecting comparability that cannot be practicably
estimated. See reconciliations of non-GAAP measures in the financial statements following this release.
Announced Acquisition of Canyon Bakehouse
In a separate press release issued today, the company announced that it has entered into an agreement to acquire
Canyon Bakehouse LLC in a transaction valued at $205 million, or $175
million net of the present value of future tax benefits. With the fastest-growing gluten-free bread loaf brand in the
U.S., Canyon Bakehouse provides Flowers an entrance to the growing and under penetrated gluten-free bakery market. Flowers
intends to leverage its national distribution network to drive growth of Canyon Bakehouse products and create enhanced value. The
acquisition, which is subject to regulatory approval and customary closing conditions, is expected to be completed later in the
fourth quarter of 2018.
Update on Project Centennial and Strategic Priorities
The company is executing on its strategic priorities under Project Centennial and implementing several initiatives to
reinvigorate the core business, capitalize on product adjacencies, reduce costs to fuel growth, and develop leading capabilities.
Launched in 2016, Project Centennial is an enterprise-wide, multi-year effort to streamline operations, drive efficiencies, and
invest in strategic capabilities strengthening Flowers' competitive position, drive profitable revenue growth, and create
shareholder value.
Highlights of the company's progress in 2018 to date include:
- On track to realize total gross savings at the upper end of the $38 million to $48 million target, primarily from a more efficient organizational structure and reduced spending on
purchased goods and services.
- Entered into an agreement to acquire Canyon Bakehouse, a leading producer of gluten-free bakery products.
- Began operating a high-speed bun line in Pennsylvania and announced closure of an
inefficient bakery in Vermont.
- Continued to refine its organizational structure to better align operating functions, enhance execution, and improve
accountability.
- Realized a significant decrease in selling, distribution, and administrative (SD&A) workforce-related expenses due to
organizational restructuring.
- Grew the recently launched Nature's Own Perfectly Crafted, a line of artisan-inspired, thick-sliced bakery
breads, and Dave's Killer Bread Boomin' Berry bagels.
- Implemented enhanced working capital policies that improved the cash conversion cycle and generated incremental cash
flow.
Matters Affecting Comparability:
|
|
|
Reconciliation of Earnings per Share to Adjusted Earnings per
Share
|
|
|
|
|
|
|
|
|
|
For the 12 Weeks Ended
|
|
|
|
Oct. 6, 2018
|
|
Oct. 7, 2017
|
|
|
|
|
|
|
|
Net income (loss) per diluted common share
|
$ 0.19
|
|
$ (0.16)
|
|
Project Centennial consulting costs
|
NM
|
|
0.02
|
|
Restructuring and related impairment charges
|
NM
|
|
0.29
|
|
Pension plan settlement loss
|
|
NM
|
|
0.01
|
|
Legal settlements
|
|
0.04
|
|
0.01
|
|
Recovery of loss on inferior ingredients
|
(0.01)
|
|
-
|
|
Multi-employer pension plan withdrawal costs
|
-
|
|
0.05
|
|
Adjusted net income per diluted common share
|
$ 0.23
|
|
$ 0.23
|
|
|
|
|
|
|
|
NM - Not Meaningful
|
|
|
|
|
|
Certain amounts may not compute due to rounding.
|
|
|
Consolidated Third Quarter 2018 Summary
Compared to the prior year third quarter where applicable
- Sales decreased 1.0% to $923.4 million.
- Percentage point change in sales attributed to:
-
- Pricing/mix: 2.5%
- Volume: -3.5%
- Net income for the current quarter was $39.6 million compared to a net loss of $33.6 million in the prior year quarter. Excluding matters affecting comparability, net income increased
$0.4 million, or 0.9%, to $48.7 million.
- Operating income for the current quarter was $53.5 million compared to a net loss of
$52.1 million in the prior year quarter. Excluding matters affecting comparability, operating
income decreased $13.4 million, or 17.1%, to $64.7 million.
- Adjusted EBITDA decreased 13.2% to $97.5 million, or 10.6% of sales, a 140-basis point
decline.
- Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 52.6% of sales, a
150-basis-point increase. These costs were higher as a percent of sales due to increased commodity prices, softer production
volumes, increased outside purchases of product (primarily DKB branded breakfast items), and decreased manufacturing
efficiencies.
- SD&A expenses were 38.2% of sales, a 10-basis point-decrease. Lower workforce-related costs, as a percentage of sales,
were partially offset by higher distributor distribution fees due to a larger portion of sales being sold via independent
distributors. Higher legal settlements were mostly offset by lower Project Centennial-related consulting costs. Additionally,
higher transportation costs in the current quarter partially offset the decrease in SD&A expenses.
- Depreciation and Amortization (D&A) expenses were $32.7 million, 3.5% of sales, flat with
the prior year third quarter.
On a consolidated basis, branded retail sales decreased 0.7% to $547.4 million, store branded
retail sales increased 1.7% to $141.0 million, while non-retail and other sales decreased 3.2% to
$235.1 million. Volume declines drove the decrease in branded retail sales as the company cycled
hurricanes in the prior year quarter. Partially offsetting the decline was continued sales growth from DKB organic
products, growth in our expansion markets, the contribution from Nature's Own Perfectly Crafted breads, and more favorable
price/mix. Store branded retail sales increased primarily due to positive price/mix. Volume declines in foodservice and vending
items drove the decrease in non-retail and other sales, partially offset by positive price/mix.
DSD Segment Summary
Compared to the prior year third quarter where applicable
- Sales decreased 0.9% to $780.3 million.
- Percentage point change in sales attributed to:
-
- Pricing/mix: 2.1%
- Volume: -3.0%
- Operating income for the current quarter was $58.8 million compared to an operating loss of
$20.3 million in the prior year quarter. In the prior year quarter, the company recognized
restructuring and related impairment charges, multi-employer pension plan withdrawal costs, and costs related to legal
settlements totaling $99.1 million.
- Adjusted EBITDA decreased 11.6% to $94.7 million.
DSD Segment branded retail sales were unchanged at $514.4 million, store branded retail sales
increased 3.4% to $114.6 million, while non-retail and other sales decreased 6.7% to $151.3 million. Branded retail sales were consistent with the prior year quarter as positive price/mix was
offset by volume declines. In the prior year quarter, hurricanes positively impacted volume. Sales of DKB products
continued to increase along with Nature's Own Perfectly Crafted breads introduced in the second quarter of fiscal 2018,
and in expansion markets. These gains were more than offset by volume declines for other branded products. Store branded retail
sales increased quarter over quarter due to positive price/mix and volume growth. Significant volume declines in foodservice
primarily resulted in the decrease in non-retail and other sales. Foodservice sales were impacted by inferior yeast and the shift
of certain foodservice business from the DSD Segment to the Warehouse Segment.
The significant favorable change in DSD Segment operating income primarily resulted from $76.6
million of restructuring and related impairment charges and $18.3 million of multi-employer
pension plan withdrawal costs incurred in the prior year quarter, as well as the benefit of the voluntary separation incentive
program and other restructuring activities, lower employee compensation costs and the recovery of a portion of the loss on
inferior ingredients in the current quarter. Increased product costs, increased distributor distribution fees, higher legal
settlements of $6.5 million, and increased marketing investments partially offset the overall
improvement in operating income.
Warehouse Segment Summary
Compared to the prior year third quarter where applicable
- Sales decreased 1.6% to $143.2 million.
- Percentage point change in sales attributed to:
-
- Pricing/mix: 3.3%
- Volume: -4.9%
- Operating income for the current quarter was $5.9 million compared to an operating loss of
$9.1 million in the prior year quarter. In the prior year quarter, the company recognized
restructuring and related impairment charges totaling $20.1 million.
- Adjusted EBITDA decreased 16.7% to $13.1 million.
Warehouse Segment branded retail sales decreased 10.9% to $32.9 million, store branded retail
sales decreased 5.0% to $26.4 million, while non-retail and other sales increased 3.8% to
$83.8 million. Branded retail sales decreased mostly due to volume declines in branded cake and to
a lesser extent in warehouse-delivered branded organic bread. Sales of store branded retail items decreased primarily due to
volume decreases in store branded cake. Non-retail and other sales, which include contract manufacturing, vending and
foodservice, increased primarily from significant volume growth in foodservice sales and to a lesser extent the shift of certain
foodservice business from the DSD Segment to the Warehouse Segment in the current year period and increased contract
manufacturing, partially offset by declines in vending sales.
The significant favorable change in the Warehouse Segment operating income was primarily due to prior year restructuring costs
of $20.1 million and lower workforce-related costs in the current year quarter, partially offset by
sales declines, higher product and distribution costs, a $1.1 million legal settlement and
$1.1 million of loss on inferior ingredients in the current year quarter.
Unallocated Corporate Expense Summary
Note: Comparisons are to consolidated sales
- Unallocated corporate expenses decreased 120 basis points to 1.2% of consolidated sales, primarily due to the $6.3 million decrease in Project Centennial consulting costs, prior year period restructuring charges of
$3.8 million, and to a lesser extent, reduced workforce-related expenses.
Cash Flow, Dividends, Share Repurchases, and Capital Allocation
In the third quarter of fiscal 2018, cash flow from operating activities was $83.4
million, capital expenditures were $25.5 million, and dividends paid were $38.0 million.
There are 6.6 million shares remaining on the company's current share repurchase authorization. As in the past, the company
expects to continue to make opportunistic share repurchases from time to time under this authorization.
Conference Call
Flowers Foods will hold a conference call to discuss its third quarter 2018 earnings at 8:30
a.m. (Eastern) on November 8, 2018. The call can be accessed by clicking on the webcast link
on flowersfoods.com/investors. 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 2017 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, Dave's Killer Bread, and
Tastykake. Learn more at www.flowersfoods.com.
FLO-IR FLO-CORP
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, including as a result of product recalls or safety concerns related to
our products, (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, (m) product recalls or safety concerns related to our products, and (n) 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 income
tax expense, 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, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted
operating income, adjusted operating income by segment, adjusted EBIT by segment, adjusted EPS, adjusted income tax expense,
adjusted selling, distribution and administrative expenses (SD&A), respectively, excluding the impact of asset impairment
charges, Project Centennial consulting costs, lease terminations and legal settlements, acquisition-related costs, and pension
plan settlements. Adjusted income tax expense also excludes the impact of tax reform. 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 6, 2018
|
|
October 7, 2017
|
|
|
October 6, 2018
|
|
October 7, 2017
|
Sales
|
$
|
923,449
|
$
|
932,822
|
|
$
|
3,071,185
|
$
|
3,047,110
|
Materials, supplies, labor and other production costs (exclusive of
depreciation and amortization shown separately below)
|
|
485,680
|
|
476,264
|
|
|
1,599,673
|
|
1,552,578
|
Selling, distribution and administrative expenses
|
|
353,051
|
|
356,826
|
|
|
1,167,879
|
|
1,175,434
|
Gain on divestiture
|
|
-
|
|
-
|
|
|
-
|
|
(28,875)
|
Loss (recovery) on inferior ingredients
|
|
(1,891)
|
|
-
|
|
|
1,993
|
|
-
|
Restructuring and related impairment charges
|
|
497
|
|
100,549
|
|
|
2,557
|
|
100,549
|
Impairment of assets
|
|
-
|
|
-
|
|
|
2,483
|
|
-
|
Multi-employer pension plan withdrawal costs
|
|
-
|
|
18,268
|
|
|
2,322
|
|
18,268
|
Depreciation and amortization expense
|
|
32,662
|
|
32,972
|
|
|
111,949
|
|
114,288
|
Income (loss) from operations
|
|
53,450
|
|
(52,057)
|
|
|
182,329
|
|
114,868
|
Other pension cost (benefit)
|
|
(171)
|
|
(1,321)
|
|
|
(1,204)
|
|
(4,687)
|
Pension plan settlement loss
|
|
930
|
|
3,030
|
|
|
6,633
|
|
3,030
|
Interest expense, net
|
|
1,565
|
|
2,730
|
|
|
6,214
|
|
11,056
|
Income (loss) before income taxes
|
|
51,126
|
|
(56,496)
|
|
|
170,686
|
|
105,469
|
Income tax expense (benefit)
|
|
11,496
|
|
(22,925)
|
|
|
34,367
|
|
33,882
|
Net income (loss)
|
$
|
39,630
|
$
|
(33,571)
|
|
$
|
136,319
|
$
|
71,587
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted common share
|
$
|
0.19
|
$
|
(0.16)
|
|
$
|
0.64
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
211,564
|
|
209,606
|
|
|
211,452
|
|
210,231
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
|
October 6, 2018
|
|
October 7, 2017
|
Sales:
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
780,253
|
$
|
787,255
|
|
$
|
2,592,363
|
$
|
2,580,007
|
Warehouse Delivery
|
|
143,196
|
|
145,567
|
|
|
478,822
|
|
467,103
|
|
$
|
923,449
|
$
|
932,822
|
|
$
|
3,071,185
|
$
|
3,047,110
|
|
|
|
|
|
|
|
|
|
|
Gain on divestiture:
|
|
|
|
|
|
|
|
|
|
Warehouse Delivery
|
$
|
-
|
$
|
-
|
|
$
|
-
|
$
|
(28,875)
|
|
$
|
-
|
$
|
-
|
|
$
|
-
|
$
|
(28,875)
|
|
|
|
|
|
|
|
|
|
|
Loss (recovery) on inferior ingredients
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
(2,986)
|
$
|
-
|
|
$
|
898
|
$
|
-
|
Warehouse Delivery
|
|
1,095
|
|
-
|
|
|
1,095
|
|
-
|
|
$
|
(1,891)
|
$
|
-
|
|
$
|
1,993
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Restructuring and impairment related charges:
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
289
|
$
|
76,625
|
|
$
|
2,187
|
$
|
76,625
|
Warehouse Delivery
|
|
175
|
|
20,091
|
|
|
251
|
|
20,091
|
Unallocated Corporate
|
|
33
|
|
3,833
|
|
|
119
|
|
3,833
|
|
$
|
497
|
$
|
100,549
|
|
$
|
2,557
|
$
|
100,549
|
|
|
|
|
|
|
|
|
|
|
Impairment of assets:
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
-
|
$
|
-
|
|
$
|
2,483
|
$
|
-
|
|
$
|
-
|
$
|
-
|
|
$
|
2,483
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Multi-employer pension plan withdrawal costs:
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
-
|
$
|
18,268
|
|
$
|
2,322
|
$
|
18,268
|
|
$
|
-
|
$
|
18,268
|
|
$
|
2,322
|
$
|
18,268
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense:
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
27,676
|
$
|
28,286
|
|
$
|
95,273
|
$
|
98,703
|
Warehouse Delivery
|
|
4,916
|
|
4,769
|
|
|
16,443
|
|
15,841
|
Unallocated Corporate
|
|
70
|
|
(83)
|
|
|
233
|
|
(256)
|
|
$
|
32,662
|
$
|
32,972
|
|
$
|
111,949
|
$
|
114,288
|
|
|
|
|
|
|
|
|
|
|
EBIT income (loss):
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
58,819
|
$
|
(20,338)
|
|
$
|
197,725
|
$
|
146,388
|
Warehouse Delivery
|
|
5,866
|
|
(9,082)
|
|
|
31,563
|
|
47,202
|
Unallocated Corporate
|
|
(11,235)
|
|
(22,637)
|
|
|
(46,959)
|
|
(78,722)
|
|
$
|
53,450
|
$
|
(52,057)
|
|
$
|
182,329
|
$
|
114,868
|
|
|
|
|
|
|
|
|
|
|
Pension plan settlement loss:
|
|
|
|
|
|
|
|
|
|
Unallocated Corporate
|
$
|
930
|
$
|
3,030
|
|
$
|
6,633
|
$
|
3,030
|
|
$
|
930
|
$
|
3,030
|
|
$
|
6,633
|
$
|
3,030
|
|
|
|
|
|
|
|
|
|
|
EBITDA income (loss):
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
$
|
86,592
|
$
|
8,047
|
|
$
|
293,321
|
$
|
245,422
|
Warehouse Delivery
|
|
10,782
|
|
(4,313)
|
|
|
48,006
|
|
63,043
|
Unallocated Corporate
|
|
(12,021)
|
|
(24,528)
|
|
|
(52,478)
|
|
(77,652)
|
|
$
|
85,353
|
$
|
(20,794)
|
|
$
|
288,849
|
$
|
230,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flowers Foods, Inc.
|
Condensed Consolidated Balance Sheet
|
(000's omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 6, 2018
|
Assets
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
49,727
|
|
|
|
|
Other Current Assets
|
|
|
494,104
|
|
|
|
|
Property, Plant & Equipment, net
|
|
|
720,197
|
|
|
|
|
Distributor Notes Receivable (includes $25,804
current portion)
|
|
|
229,380
|
|
|
|
|
Other Assets
|
|
|
12,428
|
|
|
|
|
Cost in Excess of Net Tangible Assets,
net
|
|
|
1,187,301
|
|
|
|
|
Total Assets
|
|
$
|
2,693,137
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current Liabilities
|
|
$
|
390,125
|
|
|
|
|
Long-term Debt and Capital Leases (includes
$11,286 current portion)
|
|
825,376
|
|
|
|
|
Other Liabilities
|
|
|
200,068
|
|
|
|
|
Stockholders' Equity
|
|
|
1,277,568
|
|
|
|
|
Total Liabilities and Stockholders'
Equity
|
|
$
|
2,693,137
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
|
October 6, 2018
|
|
October 7, 2017
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
39,630
|
$
|
(33,571)
|
|
$
|
136,319
|
$
|
71,587
|
Adjustments to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Total non-cash adjustments
|
|
34,592
|
|
87,977
|
|
|
149,978
|
|
150,151
|
|
Changes in assets and liabilities and pension contributions
|
|
9,214
|
|
(3,347)
|
|
|
(54,238)
|
|
2,288
|
Net cash provided by operating activities
|
|
83,436
|
|
51,059
|
|
|
232,059
|
|
224,026
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
(25,458)
|
|
(19,294)
|
|
|
(74,992)
|
|
(51,213)
|
|
Divestiture of assets
|
|
-
|
|
-
|
|
|
-
|
|
41,230
|
|
Proceeds from sale of property, plant and equipment
|
|
76
|
|
382
|
|
|
1,366
|
|
1,694
|
|
Other
|
|
1,015
|
|
(1,674)
|
|
|
214
|
|
(4,515)
|
Net cash disbursed for investing activities
|
|
(24,367)
|
|
(20,586)
|
|
|
(73,412)
|
|
(12,804)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
(37,959)
|
|
(35,606)
|
|
|
(112,247)
|
|
(105,207)
|
|
Exercise of stock options
|
|
-
|
|
2,880
|
|
|
791
|
|
9,296
|
|
Stock repurchases
|
|
-
|
|
-
|
|
|
(2,489)
|
|
(2,671)
|
|
Net change in debt borrowings
|
|
(1,250)
|
|
6,850
|
|
|
(3,750)
|
|
(101,250)
|
|
Other
|
|
313
|
|
(4,702)
|
|
|
3,646
|
|
(10,726)
|
Net cash disbursed for financing activities
|
|
(38,896)
|
|
(30,578)
|
|
|
(114,049)
|
|
(210,558)
|
Net increase (decrease) in cash and cash equivalents
|
|
20,173
|
|
(105)
|
|
|
44,598
|
|
664
|
Cash and cash equivalents at beginning of period
|
|
29,554
|
|
7,179
|
|
|
5,129
|
|
6,410
|
Cash and cash equivalents at end of period
|
$
|
49,727
|
$
|
7,074
|
|
$
|
49,727
|
$
|
7,074
|
|
|
|
|
|
|
|
|
|
|
|
Flowers Foods, Inc.
|
Reconciliation of GAAP to Non-GAAP Measures
|
(000's omitted, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Earnings 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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted common share
|
|
$
0.19
|
|
$
(0.16)
|
|
$
0.64
|
|
$
0.34
|
Gain on divestiture
|
|
-
|
|
-
|
|
-
|
|
(0.09)
|
Loss (recovery) on inferior ingredients
|
|
(0.01)
|
|
-
|
|
0.01
|
|
-
|
Restructuring and related impairment charges
|
|
NM
|
|
0.29
|
|
0.01
|
|
0.29
|
Project Centennial consulting costs
|
|
NM
|
|
0.02
|
|
0.03
|
|
0.09
|
Legal settlements and lease terminations
|
|
0.04
|
|
0.01
|
|
0.08
|
|
0.02
|
Pension plan settlement loss
|
|
NM
|
|
0.01
|
|
0.02
|
|
0.01
|
Multi-employer pension plan withdrawal costs
|
|
-
|
|
0.05
|
|
0.01
|
|
0.05
|
Adjustment to prior year provisional tax reform benefit
|
|
-
|
|
-
|
|
(0.03)
|
|
-
|
Adjusted net income per diluted common share
|
|
$
0.23
|
|
$
0.23
|
|
$
0.78
|
|
$
0.72
|
NM - not meaningful.
|
|
|
|
|
|
|
|
|
Certain amounts may not add due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Gross Margin
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
Sales
|
|
$
923,449
|
|
$
932,822
|
|
$
3,071,185
|
|
$
3,047,110
|
Materials, supplies, labor and other production costs (exclusive of
depreciation and amortization)
|
|
485,680
|
|
476,264
|
|
1,599,673
|
|
1,552,578
|
Gross Margin excluding depreciation and amortization
|
|
437,769
|
|
456,558
|
|
1,471,512
|
|
1,494,532
|
Less depreciation and amortization for production activities
|
|
18,610
|
|
19,553
|
|
62,798
|
|
67,168
|
Gross Margin
|
|
$
419,159
|
|
$
437,005
|
|
$
1,408,714
|
|
$
1,427,364
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization for production activities
|
|
$
18,610
|
|
$
19,553
|
|
$
62,798
|
|
$
67,168
|
Depreciation and amortization for selling, distribution and administrative
activities
|
|
14,052
|
|
13,419
|
|
49,151
|
|
47,120
|
Total depreciation and amortization
|
|
$
32,662
|
|
$
32,972
|
|
$
111,949
|
|
$
114,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
39,630
|
|
$
(33,571)
|
|
$
136,319
|
|
$
71,587
|
Income tax expense (benefit)
|
|
11,496
|
|
(22,925)
|
|
34,367
|
|
33,882
|
Interest expense, net
|
|
1,565
|
|
2,730
|
|
6,214
|
|
11,056
|
Other pension cost (benefit)
|
|
(171)
|
|
(1,321)
|
|
(1,204)
|
|
(4,687)
|
Pension plan settlement loss
|
|
930
|
|
3,030
|
|
6,633
|
|
3,030
|
Earnings before interest and income taxes
|
|
53,450
|
|
(52,057)
|
|
182,329
|
|
114,868
|
Gain on divestiture
|
|
-
|
|
-
|
|
-
|
|
(28,875)
|
Loss (recovery) on inferior ingredients
|
|
(1,891)
|
|
-
|
|
1,993
|
|
-
|
Restructuring and related impairment charges
|
|
497
|
|
100,549
|
|
2,557
|
|
100,549
|
Project Centennial consulting costs
|
|
729
|
|
7,050
|
|
9,376
|
|
31,845
|
Legal settlements and lease terminations
|
|
11,921
|
|
4,253
|
|
21,616
|
|
5,068
|
Multi-employer pension plan withdrawal costs
|
|
-
|
|
18,268
|
|
2,322
|
|
18,268
|
Adjusted EBIT
|
|
64,706
|
|
78,063
|
|
220,193
|
|
241,723
|
Other pension cost (benefit)
|
|
171
|
|
1,321
|
|
1,204
|
|
4,687
|
Depreciation and amortization
|
|
32,662
|
|
32,972
|
|
111,949
|
|
114,288
|
Lease termination depreciation impact
|
|
-
|
|
-
|
|
-
|
|
(1,844)
|
Adjusted EBITDA
|
|
$
97,539
|
|
$
112,356
|
|
$
333,346
|
|
$
358,854
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
923,449
|
|
$
932,822
|
|
$
3,071,185
|
|
$
3,047,110
|
Adjusted EBITDA margin
|
|
10.6%
|
|
12.0%
|
|
10.9%
|
|
11.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
11,496
|
|
$
(22,925)
|
|
$
34,367
|
|
$
33,882
|
Tax impact of:
|
|
|
|
|
|
|
|
|
Gain on divestiture
|
|
-
|
|
-
|
|
-
|
|
(11,117)
|
Loss (recovery) on inferior ingredients
|
|
(477)
|
|
-
|
|
503
|
|
-
|
Restructuring and related impairment charges
|
|
125
|
|
38,711
|
|
646
|
|
38,711
|
Project Centennial consulting costs
|
|
184
|
|
2,714
|
|
2,367
|
|
12,260
|
Legal settlements and lease terminations
|
|
3,010
|
|
1,638
|
|
5,458
|
|
1,952
|
Pension plan settlement loss
|
|
235
|
|
1,167
|
|
1,675
|
|
1,167
|
Multi-employer pension plan withdrawal costs
|
|
-
|
|
7,033
|
|
586
|
|
7,033
|
Adjustment to prior year provisional tax reform benefit
|
|
-
|
|
-
|
|
5,575
|
|
-
|
Adjusted income tax expense
|
|
$
14,573
|
|
$
28,338
|
|
$
51,177
|
|
$
83,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
39,630
|
|
$
(33,571)
|
|
$
136,319
|
|
$
71,587
|
Gain on divestiture
|
|
-
|
|
-
|
|
-
|
|
(17,758)
|
Loss (recovery) on inferior ingredients
|
|
(1,414)
|
|
-
|
|
1,490
|
|
-
|
Restructuring and related impairment charges
|
|
372
|
|
61,838
|
|
1,911
|
|
61,838
|
Project Centennial consulting costs
|
|
545
|
|
4,336
|
|
7,009
|
|
19,585
|
Legal settlements and lease terminations
|
|
8,911
|
|
2,615
|
|
16,158
|
|
3,116
|
Pension plan settlement loss
|
|
695
|
|
1,863
|
|
4,958
|
|
1,863
|
Multi-employer pension plan withdrawal costs
|
|
-
|
|
11,235
|
|
1,736
|
|
11,235
|
Adjustment to prior year provisional tax reform benefit
|
|
-
|
|
-
|
|
(5,575)
|
|
-
|
Adjusted net income
|
|
$
48,739
|
|
$
48,316
|
|
$
164,006
|
|
$
151,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
$
58,819
|
|
$
(20,338)
|
|
$
197,725
|
|
$
146,388
|
Loss (recovery) on inferior ingredients
|
|
(2,986)
|
|
-
|
|
898
|
|
-
|
Restructuring and related impairment charges
|
|
289
|
|
76,625
|
|
2,187
|
|
76,625
|
Legal settlements and lease terminations
|
|
10,827
|
|
4,253
|
|
20,522
|
|
5,068
|
Multi-employer pension plan withdrawal costs
|
|
-
|
|
18,268
|
|
2,322
|
|
18,268
|
Adjusted EBIT
|
|
66,949
|
|
78,808
|
|
223,654
|
|
246,349
|
Depreciation and amortization
|
|
27,676
|
|
28,286
|
|
95,273
|
|
98,703
|
Depreciation on lease terminations
|
|
-
|
|
-
|
|
-
|
|
(1,844)
|
Other pension cost (benefit)
|
|
97
|
|
99
|
|
323
|
|
331
|
Adjusted EBITDA
|
|
$
94,722
|
|
$
107,193
|
|
$
319,250
|
|
$
343,539
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
780,253
|
|
$
787,255
|
|
$
2,592,363
|
|
$
2,580,007
|
Adjusted EBITDA margin
|
|
12.1%
|
|
13.6%
|
|
12.3%
|
|
13.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
$
5,866
|
|
$
(9,082)
|
|
$
31,563
|
|
$
47,202
|
Gain on divestiture
|
|
-
|
|
-
|
|
-
|
|
(28,875)
|
Loss on inferior ingredients
|
|
1,095
|
|
-
|
|
1,095
|
|
-
|
Legal settlements and lease terminations
|
|
1,094
|
|
-
|
|
1,094
|
|
-
|
Restructuring and related impairment charges
|
|
175
|
|
20,091
|
|
251
|
|
20,091
|
Adjusted EBIT
|
|
8,230
|
|
11,009
|
|
34,003
|
|
38,418
|
Depreciation and amortization
|
|
4,916
|
|
4,769
|
|
16,443
|
|
15,841
|
Adjusted EBITDA
|
|
$
13,146
|
|
$
15,778
|
|
$
50,446
|
|
$
54,259
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
143,196
|
|
$
145,567
|
|
$
478,822
|
|
$
467,103
|
Adjusted EBITDA margin
|
|
9.2%
|
|
10.8%
|
|
10.5%
|
|
11.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6, 2018
|
|
October 7, 2017
|
|
October 6, 2018
|
|
October 7, 2017
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
$
(11,235)
|
|
$
(22,637)
|
|
$
(46,959)
|
|
$
(78,722)
|
Restructuring and related impairment charges
|
|
33
|
|
3,833
|
|
119
|
|
3,833
|
Project Centennial consulting costs
|
|
729
|
|
7,050
|
|
9,376
|
|
31,845
|
Adjusted EBIT
|
|
$
(10,473)
|
|
$
(11,754)
|
|
$
(37,464)
|
|
$
(43,044)
|
Depreciation and amortization
|
|
70
|
|
(83)
|
|
233
|
|
(256)
|
Other pension cost (benefit)
|
|
74
|
|
1,222
|
|
881
|
|
4,356
|
Adjusted EBITDA
|
|
$
(10,329)
|
|
$
(10,615)
|
|
$
(36,350)
|
|
$
(38,944)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Earnings per Share - Full Year Fiscal 2018
Guidance
|
|
|
|
|
|
|
|
Range Estimate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted common share
|
|
$
0.76
|
to
|
$
0.81
|
|
|
|
|
Project Centennial reorganization and consulting costs
|
|
0.05
|
|
0.05
|
|
|
|
|
Loss (recovery) on inferior ingredients
|
|
0.01
|
|
0.01
|
|
|
|
|
Legal settlements
|
|
0.08
|
|
0.08
|
|
|
|
|
Pension plan settlement loss
|
|
0.02
|
|
0.02
|
|
|
|
|
Multi-employer pension plan withdrawal costs
|
|
0.01
|
|
0.01
|
|
|
|
|
Adjustment to prior year provisional tax reform benefit
|
|
(0.03)
|
|
(0.03)
|
|
|
|
|
Adjusted net income per diluted common share
|
|
$
0.90
|
to
|
$
0.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flowers Foods, Inc.
|
|
Sales Bridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
Total Sales
|
|
|
For the 12 Week Period Ended October 6, 2018
|
Volume
|
Price/Mix
|
Divestiture
|
Change
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
-3.0%
|
2.1%
|
0.0%
|
-0.9%
|
|
|
|
|
|
|
|
|
|
Warehouse Delivery
|
-4.9%
|
3.3%
|
0.0%
|
-1.6%
|
|
|
|
|
|
|
|
|
|
Total Flowers Foods
|
-3.5%
|
2.5%
|
0.0%
|
-1.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
Total Sales
|
|
|
For the 40 Week Period Ended October 6, 2018
|
Volume
|
Price/Mix
|
Divestiture
|
Change
|
|
|
|
|
|
|
|
|
|
Direct-Store-Delivery
|
-2.0%
|
2.5%
|
0.0%
|
0.5%
|
|
|
|
|
|
|
|
|
|
Warehouse Delivery
|
3.2%
|
-0.5%
|
-0.2%
|
2.5%
|
|
|
|
|
|
|
|
|
|
Total Flowers Foods
|
-0.8%
|
1.6%
|
0.0%
|
0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View original content:http://www.prnewswire.com/news-releases/flowers-foods-inc-reports-third-quarter-2018-results-300745938.html
SOURCE Flowers Foods, Inc.