Thomasville, Ga.-based Flowers Foods has admitted that it anticipates lower-than-expected earnings for its Q2, which will end tomorrow (Saturday).
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Flowers explained that the shortfall is due to costs incurred as part of the restructuring of Mrs. Smith’s Bakeries, the company’s frozen foods business, and higher-than-planned costs at Mrs. Smith’s Bakeries’ Spartanburg, SC, facility. The company’s largest operating group, Flowers Bakeries, is performing as planned for the year.
Flowers Foods anticipates Q2 earnings per share of US$.17 to US$.19 and EBITDA of US$29m to US$30m for the quarter, which is below the March 2002 guidance provided by Flowers.
On 31 May the company announced it would restructure its operations into three groups and that a number of administrative positions at Mrs. Smith’s would be eliminated. These changes are expected to improve the company’s annualized EBITDA by about US$13m, but will result in non-recurring costs in the Q2 of about US$1.5m.
Amos R. McMullian, chairman and CEO, said: “We believe the changes taking place at Mrs. Smith’s will improve future profitability, but in the near term there are costs associated with those changes. Although Mrs. Smith’s Q3 and Q4 results remain difficult to predict, we believe that group’s performance for the remainder of the year should be more in line with our expectations.”
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By GlobalDataIn the Q1, Mrs. Smith’s experienced production issues at its Spartanburg facility that resulted in higher-than-planned costs and cuts to customer orders. Although these issues have been resolved to the extent that the plant is producing a sufficient quantity of product to fill customer orders, operating costs have continued above plan.
The restructuring, effective 14 July, will divide the company into three operating groups-Flowers Bakeries, Mrs. Smith’s, and Flowers Snack. Flowers Bakeries will continue to produce and market fresh breads and rolls for distribution through direct store delivery. Mrs. Smith’s focus will be on its frozen product category. Flowers Snack will focus on the snack business that has been part of Mrs. Smith’s Bakeries.
S&P comments on ratings
International ratings service Standard & Poor’s said today that Flowers’ revised earnings expectations will have no impact on the rating or outlook of the company.
The company’s inability to improve credit measures in the intermediate term could, however, lead to a lower rating, warned S&P.
