US: Acquisition boosts Flowers Foods Q1
In January, Flowers acquired the licence to the Earthgrains and Sara Lee brands
US baker Flowers Foods recorded an increase in earnings in the first quarter driven by gains from a recent acquisition.
In the 16 weeks ended 20 April, the US bread maker booked earnings of US$113.3m. This compared to a profit of $37.9m last year. Flowers said the company recorded a benefit of $51.3m in the period, reflecting a bargain purchase accounting gain related to a deal last autumn.
In October last year, the company acquired the licence to the Earthgrains and Sara Lee brands in California from Grupo Bimbo.
EBIT in the period amounted to $151.2m versus $59.2m last year, while net sales reached $1.13bn from $898.2m in 2012. Sales benefited from increased volumes of 19.3% and contributions from the Sara Lee/California acquisition and the purchase of Lepage Bakeries last May.
CFO Steve Kinsey said the company continues to be "very optimistic" about the outlook for fiscal 2013 and, in the second quarter, is continuing to see "very good" sales growth.
However, Kinsey Flowers was delaying publishing its full-year 2013 guidance as its acquisition of Hostess Brands' bread brands is under regulatory review.
Earlier this year, Flowers Foods won through in its bid to acquire the majority of Hostess Brands' bread units, including Wonder, Nature's Pride and Merita.
Flower said today that the bid has been approved by the bankruptcy court but is being looked at by the regulators. The company is expecting the process to be completed in the second half.
|Flowers Foods Reports First Quarter 2013 Results|
|Dollar sales and volume increases across all channels drive a 25.9% increase in sales and 64.3% increase in earnings per share, excluding certain benefit/costs
THOMASVILLE, Ga., May 16, 2013 /PRNewswire/ -- Flowers Foods, Inc. (NYSE: FLO), the second-largest producer and marketer of fresh packaged bakery foods in the United States, today reported results for its 16-week first quarter endedApril 20, 2013. Sales increased 25.9% to $1.13 billion. Diluted EPS, excluding certain benefit/costs, was $0.46, up 64.3% from last year's first quarter. The company recorded a benefit of $0.37 per diluted share related to a bargain purchase accounting gain on the Sara Lee/California acquisition and acquisition-related costs of $0.02 per diluted share. Including the benefit and costs, diluted EPS was $0.81. Other highlights for the quarter include:
Commenting on first quarter results, Chairman and CEO George Deese said, "We believe the results we reported today reflect the best performance in the company's history. We achieved substantial sales increases in both segments, across all channels, and in our primary product categories. We also delivered outstanding earnings. Throughout our company, team members performed incredibly well as they worked to serve customers' needs following Hostess' departure from the market last fall. Our investments in our bakeries and our distribution systems over several decades, combined with the strength and determination of our team, allowed us to take on new business and meet the needs of existing and new customers.
"This is an exciting time for Flowers Foods as we focus on integrating Lepage Bakeries in the Northeast and Sara Leein California, while maintaining the gains we have achieved in markets throughout the country in recent months," Deese continued. "Looking ahead, we expect to have growth opportunities in our newer markets as customers and consumers gain confidence in Nature's Own, Tastykake, and our other strong brands."
First Quarter 2013 Results
Net income for the quarter, adjusted for a bargain purchase accounting gain and acquisition-related costs, was $64.9 million, or $0.46 per diluted share compared to $37.9 million or $0.28 per diluted share in the first quarter of fiscal 2012. During the first quarter this year, the company recorded a benefit of $51.3 million, net of tax, or $0.37 per diluted share reflecting a bargain purchase accounting gain related to the Sara Lee/California acquisition. Also during the first quarter, Flowers incurred acquisition-related costs of $2.9 million, net of tax, or $0.02 per diluted share. Including these items, net income was $113.3 million, or $0.81 per diluted share.
Gross margin as a percentage of sales for the quarter was 48.2%, up 150 basis points from 46.7% in the first quarter of 2012. This increase was due primarily to higher sales volumes and decreased workforce-related costs as a percent of sales.
Selling, distribution, and administrative costs as a percent of sales for the quarter were 36.4%, down 40 basis points from 36.8% of sales in the first quarter of fiscal 2012. Higher sales volumes and lower workforce-related costs as a percent of sales were the main drivers of the decrease. Acquisition-related costs negatively impacted selling, distribution, and administrative costs by $4.5 million, or 40 basis points as a percent of sales, in the first quarter of this year.
Depreciation and amortization expenses for the quarter remained relatively stable as a percent of sales compared to last year's first quarter. Net interest expense increased in this year's first quarter as compared to last year's first quarter primarily as a result of the issuance of $400.0 million of senior notes late in the first quarter of last year. The effective tax rate for the quarter was 22.8% as compared to 35.9% in last year's first quarter. The bargain purchase accounting gain on the Sara Lee/California acquisition positively affected the tax rate 12.2% during the first quarter. The full-year tax rate is expected to be approximately 35.5% to 36.0%, excluding the effect of the bargain purchase.
Income from operations defined as earnings before interest and taxes (EBIT) adjusted for the bargain purchase accounting gain and the acquisition-related costs, was $104.4 million, or 9.2% of sales compared to $59.2 million, or 6.6% of sales in last year's first quarter. Including the benefit/costs, EBIT was $151.2 million, or 13.4% of sales. Adjusted for the benefit/costs, earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first quarter was $138.6 million, or 12.3% of sales, compared to $89.0 million, or 9.9% of sales, in last year's first quarter. Including the benefit/costs, EBITDA was $185.4 million, or 16.4% of sales.
Income from operations for the DSD segment adjusted for the bargain purchase accounting gain was $101.2 million, or 11.0% of sales for the first quarter compared to $63.8 million, or 8.7% of sales in last year's first quarter. Increased sales volumes and recent acquisitions were the primary drivers of the increase. Including the bargain purchase accounting gain, DSD's operating income was $152.5 million, or 16.5% of sales.
Warehouse (18% of sales): Sales through warehouse delivery increased 29.5%, reflecting volume increases of 33.1%, partially offset by negative net pricing/mix of 3.6%. Dollar sales and volume increased across all channels. Branded and store brand cake, foodservice, and vending were the primary drivers of the volume increases. The unfavorable net price/mix was driven primarily by a mix shift in the cake business.
Income from operations for the warehouse segment was $18.7 million, or 9.0% of sales for the first quarter compared to $9.6 million, or 6.0% of sales in last year's first quarter. This increase was due primarily to increased sales volumes.
Other Matters of Importance during the Quarter
In February 2013, the company announced that in keeping with the company's management succession plan, the board of directors elected Allen L. Shiver president and chief executive officer, effective May 22, 2013 at the annual shareholders' meeting. Shiver has 34 years of service with the company and currently serves as president. George E. Deese, current chairman of the board and chief executive officer, was elected executive chairman of the board, effective the same date.
On February 23, 2013, the company completed its previously announced acquisition of certain assets and trademark licenses from BBU, Inc., a subsidiary of Grupo Bimbo, S.A.B. de C.V. The cash purchase price was approximately $50.0 million. The company received perpetual, exclusive, and royalty-free licenses to the Sara Lee and Earthgrains brands for sliced breads, buns, and rolls in the state of California. The new business in California is being added in phases through early summer. Annualized sales for the acquisition are expected to be approximately $134.0 million.
On April 5, 2013, the company entered into a senior unsecured delayed-draw term loan facility with a commitment of up to $300.0 million to finance the pending Hostess transactions, and to pay certain acquisition-related costs and expenses. The company announced amendments to its existing $500.0 million senior unsecured credit facility and existing unsecured term loan, providing for less restrictive leverage covenants and certain more favorable terms consistent with the new term loan facility.
Outlook for Second Quarter and Full Year 2013
About Flowers Foods
Statements contained in this press release that are not historical facts are forward-looking statements. 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) competitive conditions in the baked foods industry, including promotional and price competition, (b) changes in consumer demand for our 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, (e) fluctuations in commodity pricing, (f) our ability to fully integrate recent acquisitions into our business, and (g) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value. In addition, our results may also be affected by general factors such as economic and business conditions (including the baked foods markets), interest and inflation rates and such other factors as are described in the company's filings with the Securities and Exchange Commission.
Information Regarding Non-GAAP Financial Measures
Original source: Flowers Foods
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