AUGUST 18, 2005 COMPANY PRESS RELEASE FLOWERS FOODS (NYSE: FLO)
FLOWERS FOODS' SECOND QUARTER/FIRST HALF FISCAL 2005 RESULTS
AND FISCAL 2005 GUIDANCE UPDATE
THOMASVILLE, GA--Flowers Foods (NYSE: FLO) today reported diluted earnings per
share of $.28 for its 12-week second quarter ended on July 16, 2005, an increase
of 27% compared to $.22 per share reported for the second quarter of fiscal
2004. Net income for the second quarter of 2005 was $17.7 million, an increase
of 18% over net income of $15.0 million for the second quarter of fiscal 2004.
Sales for the second quarter increased 12.4% to $405.3 million from $360.7
million in sales reported for the second quarter of last year.
For the first half or 28-weeks ended July 16, 2005, the company reported diluted
earnings per share of $.58, an increase of 38% compared to $.42 per share
reported for the same period of fiscal 2004. Net income for the first half was
$37.7 million, an increase of 31% over the net income of $28.7 million for the
first half of the previous year. Sales for the first half increased 11.3% to
$911.3 million from $818.5 million in sales reported for the second quarter of
last year.
Commenting on the results, George E. Deese, president and chief executive
officer of Flowers Foods, said, "The 12.4% increase in sales during the quarter
shows how well we are capturing growth opportunities resulting from changes in
the baking industry's competitive landscape. As the market continues to change,
we anticipate further growth opportunities. For that reason, we are once again
increasing our sales guidance for 2005. Our sales growth also requires us to
accelerate plans to add new production capacity. While net income in the quarter
benefited from the sales growth, we expect further improvements as we more fully
integrate the new sales volume into our operations," Deese continued.
The 12.4% sales increase for the quarter resulted from a 5.9% unit volume
increase, a 3.7% favorable product mix shift, and a 2.8% price increase. The
Bakeries Group experienced double-digit volume growth in both Nature's Own soft
variety bread and in branded white bread, with slight improvements in price and
mix. The Specialty Group's double-digit sales increase was achieved with pricing
and mix as the Mrs. Freshley's brand continues to gain traction in the mass
merchandise, convenience store, and vending channels. The Specialty Group's
sales growth was partially offset by the planned decrease in sales of contract
manufactured items, a trend that is expected to continue for the remainder of
the year.
Gross margin as a percentage of sales for the second quarter of 2005 improved to
50.0% compared to 49.5% in the second quarter of 2004. The sales increase offset
higher packaging and energy costs as well as the start-up costs of the new bread
production line in the company's Denton, Texas bakery. The volume increase of
both retail and foodservice buns enabled the company to re-start idle production
lines in Crossville, Tenn., and Miami.
Selling, marketing, and administrative cost as a percentage of sales was 40.2%
for the second quarter of 2005 compared to 39.8% for the second quarter last
year. The benefit of higher sales was offset by higher transportation expense as
fuel costs increased and product was transported further to meet supply demands.
Depreciation and amortization were relatively flat compared to last year. Other
income of $1.6 million was recognized from the favorable settlement of class
action litigation related to high-fructose corn syrup purchases made by the
company in prior years. Interest income from the distributor notes of $2.1
million was flat compared with last year, however, interest expense was incurred
this year because the company has drawn on its credit facility, primarily to
fund two large stock repurchases in each of the first two quarters. The 37%
effective income tax rate for the quarter is slightly lower than the 38%
effective rate the company expects for the full year. The income of the variable
interest entity is eliminated entirely since the company has no equity ownership
in the entity.
During the second quarter, the company acquired approximately 1.3 million shares
of its common stock for $28.3 million, an average of $22.54 per share. Since
inception of the stock repurchase plan in 2002 through the second quarter of
2005, the company has acquired approximately 8.8 million shares of its common
stock for $166.4 million, an average of $18.91 per share. The plan authorizes
the company to repurchase up to 11.3 million shares of common stock.
The diluted weighted average shares outstanding for the second quarter was 62.7
million shares. Accounting for share repurchases through the first half of the
year, the company expects the diluted weighted average shares to be
approximately 62.3 million for quarters three and four, and approximately 63.6
million for fiscal 2005.
The company is increasing its fiscal 2005 sales guidance and reaffirms its net
income guidance as a percentage of sales. Sales are expected to be $1.675
billion to $1.70 billion, an increase of 8% to 10%
over last year, with net income of 3.75% to 4.0% of sales. In addition, the
company is increasing expected capital expenditures by $10 million to a range of
$55 million to $60 million for fiscal 2005 as a result of the need to bring on
production capacity sooner than expected. The company's guidance represents
management's estimates and targets only and is subject to risks and
uncertainties as referenced below.
The board of directors will consider the dividend at its regularly scheduled
meeting. Any action taken will be announced following that meeting.
Flowers Foods will broadcast its quarterly conference call over the Internet at
10:30 a.m. (Eastern) August 18, 2005. Those wishing to participate should visit
Flowers' Web site: www.flowersfoods.com. The conference call can be accessed by
clicking on "Investor Center." The call also will be archived on the company's
website.
COMPANY INFORMATION
Headquartered in Thomasville, Ga., Flowers Foods is one of the nation's leading
producers and marketers of packaged bakery foods for retail and foodservice
customers. Flowers operates 34 bakeries that produce a wide range of bakery
products marketed throughout the Southeastern, Southwestern, and mid-Atlantic
states via an extensive direct-store-delivery network and nationwide through
other delivery systems. Among the company's top brands are Nature's Own,
Cobblestone Mill, Sunbeam, BlueBird, and Mrs. Freshley's. For more information,
visit www.flowersfoods.com.
FORWARD-LOOKING STATEMENTS
Statements contained in this press release and certain other written or oral
statements made from time to time by the company and its representatives that
are not historical facts are forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
relate to current expectations regarding the company's future financial
condition and results of operations 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. These forward looking statements
are based upon assumptions the company believes are reasonable. Forward-looking
statements are based on current information and are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Certain factors that may cause actual results, performance, and
achievements to differ materially from those projected may include, but are not
limited to (a) unexpected changes in any of the following: (i) general economic
and business conditions; (ii) the competitive setting in which the company
operates, including changes in pricing, advertising or promotional strategies by
the company or its competitors, as well as changes in consumer demand; (iii)
interest rates and other terms available to the company on its borrowings; (iv)
energy and raw materials costs and availability; (v) relationships with
employees, independent distributors and third party service providers; and (vi)
laws and regulations (including health-related issues), accounting standards or
tax rates in the markets in which the company operates; (b) the loss or
financial instability of any significant customer(s); (c) the company's ability
to execute its business strategy, which may involve integration of recent
acquisitions or the acquisition or disposition of assets at presently targeted
values; (d) the company's ability to operate existing, and any new,
manufacturing lines according to schedule; (e) the level of success the company
achieves in developing and introducing new products and entering new markets;
(f) changes in consumer behavior, trends and preferences, including weight loss
trends; (g) the company's ability to implement new technology as required; (h)
the credit and business risks associated with independent distributors and
customers that operate in the highly competitive retail food industry, including
the amount of consolidation in that industry; (i) customer and consumer reaction
to pricing actions; (j) existing or future governmental regulations resulting
from the events of September 11, 2001, the military action in Iraq and the
continuing threat of terrorist attacks that could adversely affect the company's
business
and its commodity and service costs; and (k) any business disruptions due to
political instability, armed hostilities, incidents of terrorism or the
responses to or repercussions from any of these or similar events or conditions.
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 disclosures made by the company (such as in our other filings with the
Securities and Exchange Commission ("SEC") or in other company press releases)
for other factors that may cause actual results to differ materially from those
projected by the company. You should not 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. You are advised, however, to consult any
further public disclosures by the company (such as in our filings with the SEC
or in company press releases) on related subjects.
Contact:
Jimmy M. Woodward, Senior VP and Chief Financial Officer, (229) 227-2266
Marta J. Turner, Senior VP/Corporate Relations, (229) 227-2348
FLOWERS FOODS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
(000's omitted, except per share data)
FOR THE 12 - For the 12 - FOR THE 28 - For the 28 -
WEEK Week WEEK Week
PERIOD ENDED Period Ended PERIOD ENDED Period Ended
------------- ------------- ------------- -------------
JULY 16, 2005 July 17, 2004 JULY 16, 2005 July 17, 2004
------------- ------------- ------------- -------------
Sales $ 405,300 $ 360,686 $ 911,340 $ 818,525
Materials, supplies, labor and other production costs 202,511 181,974 455,275 410,028
Selling, marketing and administrative expenses 163,024 143,386 367,015 329,820
Depreciation and amortization 13,427 12,597 31,167 29,499
Other income (1,591) 0 (1,591) 0
------------- ------------- ------------- -------------
Income from continuing operations before interest,
income taxes and minority interest (EBIT) 27,929 22,729 59,474 49,178
Interest income, net 1,396 1,916 3,493 4,593
------------- ------------- ------------- -------------
Income from continuing operations before income taxes
and minority interest (EBT) 29,325 24,645 62,967 53,771
Income tax expense 10,843 9,363 24,113 20,137
------------- ------------- ------------- -------------
Income from continuing operations before minority interest 18,482 15,282 38,854 33,634
Minority interest in variable interest entity (825) (324) (1,200) (1,466)
------------- ------------- ------------- -------------
Income from continuing operations 17,657 14,958 37,654 32,168
Discontinued operations, net of tax 0 0 0 (3,486)
------------- ------------- ------------- -------------
Net income $ 17,657 $ 14,958 $ 37,654 $ 28,682
============= ============= ============= =============
Per share amounts:
Income from continuing operations $ 0.28 $ 0.22 $ 0.58 $ 0.47
Discontinued operations 0.00 0.00 0.00 (0.05)
------------- ------------- ------------- -------------
Net income $ 0.28 $ 0.22 $ 0.58 $ 0.42
============= ============= ============= =============
Diluted weighted average shares outstanding 62,705 67,569 64,488 67,932
============= ============= ============= =============
</Table>
FLOWERS FOODS
- --------------------------------------------------------------------------------
SEGMENT REPORTING
(000's omitted)
<Table>
<Caption>
FOR THE 12 - For the 12 - FOR THE 28 - For the 28 -
WEEK PERIOD Week Period WEEK PERIOD Week
ENDED Ended ENDED Period Ended
------------- ------------- ------------- -------------
JULY 16, 2005 July 17, 2004 JULY 16, 2005 July 17, 2004
------------- ------------- ------------- -------------
Sales:
Flowers Bakeries Group $ 319,929 $ 285,061 $ 716,603 $ 642,207
Flowers Specialty Group 85,371 75,625 194,737 176,318
------------- ------------- ------------- -------------
$ 405,300 $ 360,686 $ 911,340 $ 818,525
============= ============= ============= =============
EBITDA from Continuing Operations:
Flowers Bakeries Group $ 39,278 $ 35,571 $ 83,282 $ 78,920
Flowers Specialty Group 8,719 5,662 21,646 15,770
Flowers Foods (6,641) (5,907) (14,287) (16,013)
------------- ------------- ------------- -------------
$ 41,356 $ 35,326 $ 90,641 $ 78,677
============= ============= ============= =============
Depreciation and Amortization:
Flowers Bakeries Group $ 10,627 $ 10,119 $ 25,020 $ 23,464
Flowers Specialty Group 2,752 2,600 6,095 6,185
Flowers Foods 48 (122) 52 (150)
------------- ------------- ------------- -------------
$ 13,427 $ 12,597 $ 31,167 $ 29,499
============= ============= ============= =============
EBIT from Continuing Operations:
Flowers Bakeries Group $ 28,651 $ 25,452 $ 58,262 $ 55,456
Flowers Specialty Group 5,967 3,062 15,551 9,585
Flowers Foods (6,689) (5,785) (14,339) (15,863)
------------- ------------- ------------- -------------
$ 27,929 $ 22,729 $ 59,474 $ 49,178
============= ============= ============= =============
</Table>
FLOWERS FOODS
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
(000's omitted)
JULY 16, 2005
-------------
ASSETS
- -------------------------------------------------------------------
Cash and Cash Equivalents $ 15,425
Other Current Assets 225,326
Property, Plant & Equipment, net 428,227
Distributor Notes Receivable (includes $8,997 current portion) 81,167
Other Assets 18,733
Cost in Excess of Net Tangible Assets, net 72,684
-------------
Total Assets $ 841,562
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------
Current Liabilities $ 147,774
Bank Debt 55,000
Other Debt and Capital Leases (includes $3,893 current portion) 26,542
Other Liabilities 101,359
Minority Interest in Variable Interest Entity 3,119
Common Stockholders' Equity 507,768
-------------
Total Liabilities and Stockholders' Equity $ 841,562
=============
</Table>
FLOWERS FOODS
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(000's omitted)
<Table>
<Caption>
FOR THE 12 - FOR THE 28 -
WEEK PERIOD WEEK PERIOD
ENDED ENDED
-------------- --------------
JULY 16, 2005 JULY 16, 2005
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,657 $ 37,654
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 13,427 31,167
Minority interest in variable interest entity 825 1,200
Pension contribution 0 (25,000)
Changes in assets and liabilities (9,041) (15,224)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 22,868 29,797
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (8,861) (17,029)
Other 1,489 1,576
-------------- --------------
NET CASH DISBURSED FOR INVESTING ACTIVITIES (7,372) (15,453)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (6,172) (11,519)
Stock options exercised 3,545 5,519
Stock repurchases (28,328) (107,300)
Increase in book overdraft 4,901 13,045
Proceeds from debt borrowings 20,000 79,000
Debt and capital lease obligation payments (24,460) (25,122)
-------------- --------------
NET CASH DISBURSED FOR FINANCING ACTIVITIES (30,514) (46,377)
-------------- --------------
Net decrease in cash and cash equivalents (15,018) (32,033)
Cash and cash equivalents at beginning of period 30,443 47,458
-------------- --------------
Cash and cash equivalents at end of period $ 15,425 $ 15,425
============== ==============
</Table>