Thomasville / GA. (ff) Flowers Foods Inc. reported results for its twelve and 40 weeks ended October 06, 2012. Sales were 717,3 million USD compared with 675,4 million USD for the third quarter of 2011. Net income was 31,2 million USD or 0,22 USD per share-diluted, compared with 31,0 million USD or 0,23 USD per share-diluted, in last year´s third quarter. Adjusted for one-time acquisition-related costs, earnings per share were 0,25 USD for the quarter. Overview:

• Increased net sales by 6,2 percent
• Delivered earnings per share of 0,22 USD as reported and 0,25 USD adjusted for one-time costs
• Increased operating income
• Generated 55,4 million USD in cash flow from operations
• Completed the acquisition of Lepage Bakeries in Auburn, Maine
• 2012 sales guidance increase of seven to nine percent confirmed; earnings per share guidance tightened to 3,5 percent to five percent increase
• On October 24, announced the acquisition of certain assets and trademark licenses for Sara Lee and Earthgrains from BBU Inc., a subsidiary of Grupo Bimbo S.A. B. de C.V.

George E. Deese, Flowers Foods´ chairman and chief executive officer, said, «We delivered solid sales growth in the quarter in spite of a highly competitive marketplace and continued economic pressure on consumers. Margins were impacted by higher promotional activity and soft volumes. However, the Lepage acquisition contributed nicely to our sales increase. We also achieved positive price/mix that is encouraging. Nature´s Own again drove our internal growth, helping to offset lower sales of white breads, buns and rolls».

«The integration of Lepage is going well with sales and earnings in line with our expectations. We are introducing Nature´s Own and Tastykake in the Lepage market during the fourth quarter and are pleased with trade customers´ reaction to those brands as an add-on to Lepage´s product offerings. The recently announced acquisition of trademark licenses for the Sara Lee and Earthgrains brands in California strengthens our position and gives us a growth platform in that high population market for years to come. When the transaction is completed, our fresh baked foods will be available to more than 75 percent of the U.S. population, which puts us ahead of our previously announced goal».

«In the fourth quarter, we have begun taking pricing to offset higher input costs for 2013 and we also are reducing the frequency and depth of our promotions. We are confident in our team´s ability to continue driving growth as we leverage the power of our Nature´s Own and Tastykake brands while successfully integrating two highly strategic acquisitions into Flowers Foods».

Third Quarter 2012 Results

For the twelve-week third quarter of 2012, sales were 717,3 million USD, a 6,2 percent increase from the 675,4 million USD in last year´s third quarter. This increase was attributable to favourable net price/mix of 2,7 percent, contributions from the Lepage acquisition of 5,8 percent, partially offset by volume declines of 2,3 percent. The favourable net price/mix was driven by the branded retail and non-retail channels. The volume decline was a result of declines across all channels. In the branded retail channel, cake and white bread volume declines were partially offset by an increase in soft variety volume. Store brand cake declines led the volume decrease in that channel. The non-retail channel volume declines were primarily related to the institutional and contract manufacturing categories, partially offset by increases in the foodservice category.

Net income for the quarter was 31,2 million USD compared to 31,0 million USD in the third quarter of fiscal 2011. For the quarter, diluted earnings per share were 0,22 USD, down 4,3 percent as compared to 0,23 USD in last year´s third quarter. During the third quarter this year, we incurred one-time acquisition-related costs of 4,0 million USD, net of tax or 0,03 USD per diluted share and in last year´s third quarter, we incurred one-time costs related to the Tasty acquisition of 0,5 million USD, net of tax, but this had no effect on earnings per diluted share.

Gross margin as a percentage of sales for the quarter was 46,7 percent, up 80 basis points from 45,9 percent in the third quarter of 2011. This increase was due primarily to gross margin contributed by Lepage. Higher sales and improved manufacturing efficiencies also contributed to the increase. Gross margin in the quarter was negatively impacted by higher promotions.

Selling, distribution and administrative costs as a percent of sales for the quarter were 35,9 percent, up 50 basis points from 35,4 percent of sales in the third quarter of fiscal 2011. Increases in acquisition-related and workforce-related costs were the main drivers of the increase. The one-time acquisition-related costs were 5,1 million USD or 70 basis points as a percent of sales during the third quarter this year and 0,7 million USD or ten basis points as a percent of sales in last year´s third quarter.

Depreciation and amortization expenses for the quarter remained relatively stable as a percent of sales compared to last year´s third quarter. We incurred net interest expense during the quarter due to the issuance in the second quarter of this year of 400,0 million USD of 4,375 percent senior notes due 2022, with the majority of the proceeds from the notes used for the Lepage transaction. The effective tax rate for the quarter was 36,4 percent as compared to 35,4 percent in last year´s third quarter. This increase was primarily due to certain temporary differences that reduced the Section 199 deduction and certain non-deductible, acquisition-related costs.

Operating income, defined as earnings before interest and taxes (Ebit), for the third quarter was 52,7 million USD or 7,3 percent of sales as compared to 47,8 million USD or 7,1 percent of sales in last year´s third quarter. Earnings before interest, taxes, depreciation and amortization (Ebitda) for the third quarter was 77,4 million USD or 10,8 percent of sales compared to 70,6 million USD or 10,5 percent of sales for the third quarter of 2011. One-time acquisition-related costs negatively affected Ebit and Ebitda by 5,1 million USD or 70 basis points as a percent of sales in this year´s third quarter and by 0,7 million USD or ten basis points as a percent of sales in last year´s third quarter.

Segment Results

DSD (83 percent of sales): During the quarter, the company´s direct-store-delivery (DSD) sales increased 6,9 percent, reflecting positive net price/mix of 0,7 percent, contribution from the Lepage acquisition of 7,0 percent, offset by volume decreases of 0,8 percent. The positive net price/mix was primarily driven by the branded retail channel, primarily cake. The volume decrease was a result of declines in the branded cake, foodservice and institutional categories, partially offset by increases in the soft variety category. Operating income for the DSD segment was 58,6 million USD or 9,9 percent of sales for the third quarter compared to 47,0 million USD or 8,5 percent of sales in last year´s third quarter. This increase was attributable to the Lepage acquisition, lower ingredient costs and improved manufacturing efficiencies.

Warehouse (17 percent of sales): Sales through warehouse delivery increased 2,8 percent, reflecting positive price/mix of 9,4 percent, partially offset by volume decreases of 6,6 percent. The positive price/mix was primarily attributable to the contract manufacturing category in the non-retail channel. The volume decrease was the result of declines in store brand cake and contract manufacturing, partially offset by increased foodservice volume. Operating income for the warehouse segment was 7,6 million USD or 6,1 percent of sales for the third quarter compared to 7,3 million USD or 6,0 percent of sales in last year´s third quarter.

Cash Flow

During the third quarter, cash flow from operating activities was 55,4 million USD. The company invested 20,0 million USD in capital improvements and paid dividends of 22,1 million USD to shareholders. During the quarter, under the company´s share repurchase plan, the company acquired 600’000 shares of its common stock for 12,2 million USD, an average price per share of 20,39 USD. Since the inception of the plan, the company has acquired 38,5 million shares for 444,4 million USD, an average of 11,55 USD per share.

Outlook for 2012

The company continues to expect 2012 sales to increase 7,0 percent to 9,0 percent over 2011. Earnings per share are now expected to increase 3,5 percent to 5,0 percent, excluding one-time costs, over the 2011 adjusted earnings per share of 0,96 USD. Previous guidance was for earnings per share to increase 3,5 percent to 8 percent. As previously discussed, earnings per share are expected to be flat to slightly up, excluding the contribution from the Lepage acquisition, which was completed early in the third quarter.

Thomasville / GA. (ff) Flowers Foods Inc. reported sales and earnings for its twelve and 40 weeks ended October 08, 2011. Summary and highlights:

• Reported diluted earnings per share of 0,23 USD, equal to last year´s third quarter; year-to-date, diluted earnings per share of 0,73 USD (0,79 USD excluding one-time charges relating to the Tasty Baking acquisition and the closing of a facility in the first quarter), compared to 0,76 USD for the first nine months of 2010;
• Achieved sales increase of 13,0 percent compared to last year´s third quarter, with price/mix contributing 4,9 percent and Tasty acquired sales contributing 8,7 percent, offset by a volume decline of ,6 percent; increased sales year-to-date 6,0 percent, with price mix of 3,7 percent, acquisitions contribution of 3,6 percent, offset by a volume decline of 1,3 percent;
• Continued to experience pressure on margins from higher input costs;
• Introduced the Tastykake brand in Flowers´ core markets in the Southeast; continued integration of Tastykake;
• Announced 2011 sales growth expected to be in line with guidance of seven percent to eleven percent; 2011 earnings expected to be at low end of guidance; and
• Offered outlook for 2012-sales within long-term growth targets of five percent to ten percent; input costs projected up four percent to eight percent.

George E. Deese, Flowers Foods´ chairman and chief executive officer: «Flowers Foods achieved strong sales growth in the quarter and delivered solid earnings despite the challenges presented by ongoing economic uncertainty. Our sales growth was driven by a combination of pricing/mix and the contribution from the Tasty acquisition. Earnings were driven by continued strong performance in the DSD segment, although cost increases and sales mix pressured gross margin. In the warehouse segment, margins were negatively impacted as significantly higher ingredient costs were not fully offset by pricing and by the previously announced shift in certain planned volume to the fourth quarter».

«I am pleased that our integration of Tasty is progressing as scheduled and meeting our expectations. During the quarter, we rolled out Tastykake products in our DSD markets across the Southeast and we will continue moving the brand into other Flowers markets».

«The weak economy and high unemployment continued to pressure the markets and impact consumer buying patterns during the quarter. However, we remain confident in our team´s ability to manage through those challenges and leverage our long history of taking care of customers´ needs, outperforming in the marketplace and creating long-term value for shareholders», Deese said.

Third Quarter 2011 Results

For the twelve-week third quarter of 2011, sales increased 13,0 percent to 675,4 million USD compared to the 597,9 million USD reported for last year´s third quarter. The sales increase was attributable to net favourable pricing/mix of 4,9 percent, contributions from the Tasty acquisition of 8,7 percent, partially offset by decreased volume of 0,6 percent. Price/mix and Dollar sales increased across all major channels. The volume decline was primarily the result of lower volume in the branded retail channel, particularly in the white bread and snack cake categories, partially offset by increases in the store brand, foodservice and contract manufacturing channels.

Net income for the quarter was 31,0 million USD compared to the 31,2 million USD reported for the third quarter of fiscal 2010. Net income was negatively impacted 0,5 million USD, net of tax, due to one-time acquisition costs. Diluted earnings per share were 0,23 USD compared to 0,23 USD reported in the third quarter last year.

Gross margin as a percent of sales for the quarter was 45,9 percent compared to 47,1 percent in last year´s third quarter, a decline of 120 basis points. This decrease was due primarily to an increase in ingredient and packaging costs as a percent of sales, partially offset by price increases and decreases in workforce-related costs as a percent of sales. The increase in ingredient costs was primarily attributable to flour, sweeteners, shortening and cocoa.

Selling, distribution and administrative costs as a percent of sales for the quarter were 35,4 percent compared to 36,0 percent in the same quarter last year. This decrease of 60 basis points as a percent of sales was primarily the result of lower workforce-related costs as a percent of sales.

Depreciation and amortization expenses for the quarter remained relatively flat as a percent of sales as compared to last year´s third quarter. Net interest income for the quarter decreased 0,9 million USD from last year´s third quarter due to higher interest expense as a result of borrowings related to the Tasty acquisition. The effective tax rate for the quarter was 35,4 percent compared to 34,9 percent in the third quarter last year. This increase was primarily due to favourable discrete items in last year´s third quarter.

Operating margin as a percent of sales for the quarter was 7,1 percent compared to 7,8 percent in last year´s third quarter. Ebitda as a percent of sales for the third quarter was 10,5 percent compared to 11,1 percent for the same quarter last year.

Segment Results

DSD Segment: During the quarter, the company´s DSD sales increased 16,3 percent. This increase consisted of positive net pricing/mix of 4,8 percent, an 11,0 percent contribution from the Tasty acquisition and volume increases of 0,5 percent. Price/mix and Dollar sales increased quarter over quarter in all major channels. Increased volumes in the store-brand and foodservice channels were partially offset by decreased volume in the branded retail channel.

Operating income, defined as earnings before interest and taxes (Ebit), for the DSD segment was 47,0 million USD or 8,5 percent of sales for the third quarter as compared to 42,2 million USD or 8,9 percent of sales in last year´s third quarter. This increase was primarily due to increased sales, partially offset by increases in ingredients, mainly flour and packaging costs. During the quarter, Tasty was neutral to operating income, as expected.

Warehouse Delivery Segment: Sales in the warehouse delivery segment were relatively flat as compared to the third quarter last year. Net pricing/mix increases of 3,4 percent were offset by volume declines of 3,4 percent. All major channels experienced positive pricing/mix. Decreased volume in the branded retail and store-brand channels was partially offset by increased volume in the foodservice and contract manufacturing channels.

Operating income for the Warehouse segment was 7,3 million USD or 6,0 percent of sales for the third quarter as compared to 12,2 million USD or 10,0 percent of sales for last year´s third quarter. This decrease is due primarily to higher ingredient costs, mainly flour, sweeteners, shortening and cocoa, which were not fully offset by pricing.

Cash Flow

Although negatively impacted during the quarter by hedging activities and pension contributions, cash flow from operations was 28,6 million USD. During the third quarter, the company invested 21,9 million USD in capital improvements and paid dividends of 20,3 million USD to shareholders. During the quarter, under its share repurchase plan, the company acquired 459’700 shares of its common stock for 8,6 million USD, an average price per share of 18,64 USD. Since the inception of the plan, the company has acquired 37,8 million USD shares of its common stock for 430,8 million USD for an average price per share of 11,40 USD. Under the plan, 7,2 million USD shares may still be repurchased.

Year-To-Date 2011 Results

For the 40 weeks of 2011, sales increased 6,0 percent to 2,12 billion USD compared to 2,00 billion USD last year. The sales increase consisted of positive net price/mix of 3,7 percent, contributions from the Tasty acquisition of 3,6 percent and decreased volume of 1,3 percent. Price/mix increased across all major channels. Volume was impacted by lower volume in the branded retail channel. The foodservice channel, driven by a decrease in the institutional category, also experienced volume declines. Partially offsetting these volume declines were increases in store brand volume.

For the three quarters, net income was 100,4 million USD, a decrease of 4,9 percent as compared to the 105,6 million USD reported for the 40 weeks of fiscal 2010. Diluted earnings per share were 0,73 USD, a 3,9 percent decrease from the 0,76 USD reported in the three quarters last year. Excluding one-time costs of 7,9 million USD, net of tax, relating to the acquisition of Tasty and the closing of a manufacturing facility in the first quarter, diluted earnings per share were 0,79 USD.

Gross margin as a percent of sales for the 40 weeks was 47,2 percent compared to 47,5 percent for the 40 weeks last year. Costs for a manufacturing facility closure in the first quarter negatively impacted gross margin 2,8 million USD or ten basis points as a percent of sales and ingredient costs increased 30 basis points as a percent of sales.

Selling, distribution and administrative costs as a percent of sales for the 40 weeks were 36,6 percent compared to 36,3 percent for the 40 weeks last year. One-time costs of 6,0 million USD associated with the Tasty acquisition negatively impacted selling, distribution and administrative costs 30 basis points as a percent of sales. Costs of 2,4 million USD associated with the manufacturing facility closure negatively impacted selling, distribution and administrative costs ten basis points as a percent of sales.

Depreciation and amortization expenses year-to-date remained relatively flat as a percent of sales as compared to last year´s year-to-date. Net interest income for the forty weeks decreased 0,6 million USD from last year´s forty weeks. The effective tax rate year-to-date was 35,2 percent as compared to 35,3 percent year-to-date last year. The full-year tax rate is expected to be approximately 35,0 percent to 35,5 percent.

For the 40 weeks, operating margin as a percent of sales was 7,2 percent compared to 8,0 percent in last year´s year-to-date. Excluding the one-time acquisition related costs of 6,0 million USD and one-time manufacturing facility closure costs of 5,7 million USD, operating margin as a percent of sales was 7,7 percent. Ebitda as a percent of sales year-to-date was 10,6 percent compared to 11,3 percent for the same period last year. Excluding the one-time acquisition related costs and the manufacturing facility closure costs, Ebitda as a percent of sales was 11,1 percent.

2011 Forecast and 2012 Outlook

Steve Kinsey, executive vice president and chief financial officer: «With three quarters completed, we anticipate ending 2011 with sales growth well within our current guidance of seven percent to eleven percent, including acquisitions. In regard to earnings, we forecasted flat to up five percent for 2011, excluding one-time costs. With fourth quarter input costs being the toughest comparison year-over-year and continued volume pressure in our warehouse segment, we now anticipate earnings for the year will be on the lower end of our earnings guidance range».

«Looking ahead to 2012, we expect to achieve sales growth in line with our long-term growth target of five percent to ten percent. As we think about input costs for next year, we do expect continued volatility in commodities. Looking at our current ingredient purchases as we know them today with estimates for the remaining purchases, we are forecasting input costs (ingredients, packaging and natural gas) will increase four percent to eight percent on an annual basis with the majority of the cost headwinds in the first half». Kinsey said the company will provide definitive earnings guidance in early February with its fourth quarter 2011 earnings report.