Thomasville / GA. (ff) Flowers Foods Inc., producer of Nature’s Own, Wonder, Tastykake, Dave’s Killer Bread, reported financial results for the company’s 12-week third quarter ended October 09, 2021.
Third Quarter Summary compared to Q2-2020 where applicable
- Sales increased 3.9 percent to USD 1.028 billion compared to results in the prior year period.
- Net income decreased 12.4 percent to USD 38.9 million. Adjusted net income increased 3.9 percent to USD 64.9 million.
- Adjusted Ebitda increased 1.8 percent to USD 118.5 million. Adjusted Ebitda represented 11.5 percent of sales, a 30-basis point decrease.
- Diluted EPS decreased USD 0.03 to USD 0.18. Adjusted diluted EPS increased USD 0.01 to USD 0.30.
Chief Executive’s Remarks
«I’m pleased to report another record third quarter,» said Ryals McMullian, Flowers Foods’ president and CEO. «We generated sales and earnings above our strong year-ago results as our leading brands gained market share and our non-retail business steadily recovers from the effects of the pandemic. Our performance is a testament to the dedication of our team members, especially those in our bakeries, who have worked tirelessly to meet consumer demand during this challenging time.
«In light of our strong year-to-date performance, we are raising our 2021 sales and earnings guidance,» he continued. «Investments in innovation and marketing are driving sales growth and brand strength, improving our ability to manage inflationary pressures. We will continue executing on our plans to further strengthen our brands, expand margins, and explore potential acquisitions, and we remain confident in achieving our long-term financial targets.»
Expectation for the 52-week Fiscal 2021
- Sales in the range of approximately USD 4.300 billion to USD 4.344 billion, representing a decrease of approximately 1.0 percent to 2.0 percent compared to the prior year period. The new guidance represents an increase over prior guidance of approximately USD 4.256 billion to USD 4.300 billion. This change includes a 1.8 percent reduction in sales due to one fewer week in fiscal 2021.
- Diluted EPS in the range of approximately USD 1.22 to USD 1.26, an increase over prior guidance of USD 1.17 to USD 1.22. EPS guidance includes a USD 0.01 impact in the fourth quarter for appreciation bonuses to be paid to our frontline workers. The effect of one fewer week in fiscal 2021 impacts EPS by approximately USD 0.02.
The company’s outlook is based on the following assumptions:
- Depreciation and amortization in the range of USD 135 million to USD 140 million
- Net interest expense of approximately USD 8 million
- An effective tax rate of approximately 24.5 percent
- Weighted average diluted share count for the year of approximately 213 million shares
- Capital expenditures for the year in the range of USD 125 million to USD 135 million
Matters Affecting Comparability
|Reconciliation of Earnings per Share to Adjusted Earnings per Share||For the 12 Week Period Ended||For the 12 Week Period Ended|
|October 09, 2021||October 03, 2020|
|Net income per diluted common share||USD||0.18||USD||0.21|
|Project Centennial consulting costs||–||0.02|
|Recovery on inferior ingredients||NM||–|
|Business process improvement consulting costs||0.03||–|
|Legal settlements and related costs||0.08||0.01|
|ERP Road Mapping consulting costs||–||0.01|
|Multi-employer pension plan withdrawal costs||0.01||–|
|Pension plan settlement gain||–||(0.03)|
|Restructuring and related impairment charges||–||0.07|
|Adjusted net income per diluted common share||USD||0.30||USD||0.29|
Consolidated Third Quarter Operating Highlights versus Q3-2020
- Sales increased 3.9 percent to USD 1.028 billion compared to record results in the prior year period.
- Percentage point change in sales attributed to:
- Pricing/mix: 6.4 percent
- Volume: -2.5 percent
- Branded retail sales increased USD 31.6 million or 4.8 percent to USD 689.1 million, store branded retail sales decreased USD 11.5 million or 8.5 percent to USD 124.6 million, while non-retail and other sales increased USD 18.1 million or 9.2 percent to USD 214.2 million.
- Branded retail sales increased primarily due to favourable price/mix and improved promotional efficiency, partially offset by volume declines from moderating at-home food consumption.
- Store branded retail sales decreased primarily due to volume declines as consumer purchasing shifted to branded retail products, partially offset by increased sales of store branded cake and gluten-free items.
- Non-retail and other sales increased due to recovering demand from restaurants and schools, as well as more favourable pricing.
- Net income decreased 12.4 percent to USD 38.9 million due primarily to legal settlements. Adjusted net income increased 3.9 percent to USD 64.9 million due to higher sales, which drove cost leverage of certain items, and lower interest expense, partially offset by increased marketing investment and transportation costs.
- Adjusted Ebitda increased 1.8 percent to USD 118.5 million, representing 11.5 percent of sales, a 30-basis point decrease.
- Materials, supplies, labour, and other production costs (exclusive of depreciation and amortization) were 50.1 percent of sales, a 20-basis point decrease. These costs decreased as a percentage of sales due to higher sales and USD 1.9 million of start-up costs in the year-ago period related to the conversion of our Lynchburg, Virginia facility to an organic bakery. More favourable price/mix mitigated rising commodity costs, partially offset by reduced outside purchases.
- Selling, distribution and administrative (SD+A) expenses were 41.5 percent of sales, a 240-basis point increase, impacted by legal settlements and increased consulting costs mostly related to our digital strategy initiatives, as well as increased marketing investments and higher transportation costs. Excluding matters affecting comparability, adjusted SD+A expenses were 38.4 percent of sales, a 40-basis point increase from the prior year period due to the aforementioned increased marketing investments and higher transportation costs, partially offset by lower distributor distribution fees due to the mix shift.
- Depreciation and amortization (D+A) expenses were USD 31.7 million, or 3.1 percent of sales, a 10-basis point decrease.
Cash Flow, Capital Allocation, and Capital Return
Year-to-date, through the third quarter of fiscal 2021, cash flow from operating activities decreased by USD 49.2 million to USD 315.2 million, capital expenditures increased USD 18.5 million to USD 86.7 million, and dividends paid increased USD 6.6 million to USD 131.5 million. Cash and cash equivalents were USD 307.5 million at the end of the third quarter of fiscal 2021.
There are 5.8 million shares that remain authorized for repurchase under the company’s current share repurchase plan. The company expects to continue to execute share repurchases from time to time under this plan.