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Flowers Foods, Inc. Reports Second Quarter 2018 Results

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Flowers Foods, Inc. Reports Second Quarter 2018 Results

PR Newswire

THOMASVILLE, Ga., Aug. 8, 2018 /PRNewswire/ -- Flowers Foods, Inc. (NYSE:FLO), producer of Nature's Own, Wonder, Tastykake, Dave's Killer Bread, and other bakery foods, today reported financial results for the company's 12-week second quarter ended July 14, 2018.

Highlights:
Compared to the prior year second quarter where applicable

  • Sales grew 1.6%. Market share continued to increase, primarily driven by solid growth from Dave's Killer Bread (DKB), Wonder, and Nature's Own.
  • Increased investments to drive consumer trial of new products, operational disruptions and additional costs due to inferior yeast, and elevated input and transportation costs negatively impacted adjusted EBITDA(1) margin.
  • Diluted EPS was unchanged at $0.21.
  • Adjusted diluted EPS(2) increased $0.01 to $0.25.
  • Revised earnings guidance for fiscal 2018: The company now expects adjusted diluted EPS in the range of $1.00 to $1.07. Previously the company expected adjusted diluted EPS in the range of $1.04 to $1.16.

(1)   Earnings before Interest, Taxes, Depreciation and Amortization, adjusted for certain items affecting comparability. See reconciliations of non-GAAP measures in the financial statements following this release.

(2)   See reconciliations of non-GAAP measures in the financial statements following this release.

CEO's Remarks
"In the second quarter, we achieved solid sales growth and continued to execute on our initiatives under Project Centennial," said Allen Shiver, Flowers Foods president and CEO. "While we were pleased with our sales growth, several factors impacted our gross margins during the quarter, including promotional investments we made to support new products and inflationary cost pressures from commodities, labor, and transportation. In addition, we experienced widespread operational disruption caused by inferior yeast received from a supplier that impacted many of our bakeries. It took an extraordinary effort from our procurement, manufacturing, distribution, and sales teams to address the situation, and return operations to normal. We are continuing to assess the potential impact of the issue and our options with regard to being made whole by the supplier.

"As a result of these factors, we are revising our outlook for the year. Although I am proud of the team's work to serve the market under difficult circumstances, we are not satisfied with our financial results so far this year. We have successfully navigated inflationary environments before, and we are working aggressively to address these cost headwinds using a variety of tools, including increased urgency with our supply chain optimization project."

Mr. Shiver continued, "We are in the midst of a multi-year plan that is positioning Flowers for long-term success and value creation as a national branded baked foods company. We've been operating under our new organizational structure for seven months now and are fundamentally changing the way in which we work. The appointment of Ryals McMullian as chief operating officer is intended to enhance accountability as we optimize our supply chain, reduce costs, and drive profitable growth. Through our transformation, I am confident we can overcome the current challenges and successfully position Flowers Foods to drive enhanced value for shareholders."

Revised Outlook for Fiscal 2018:

  • Expected sales in the range of approximately $3.921 billion to $3.982 billion, representing growth of approximately 0.0% to 1.6%.
  • Expected adjusted diluted EPS in the range of approximately $1.00 to $1.07, representing growth of approximately 12.4% to 20.2%.
  • Adjusted EPS guidance excludes consulting and restructuring costs associated with Project Centennial, which are expected to be in the range of $13 million to $15 million, and costs associated with matters affecting comparability that cannot be practicably estimated. See reconciliations of non-GAAP measures in the financial statements following this release.

Update on Project Centennial & Strategic Priorities
The company is executing on its strategic priorities under Project Centennial and implementing multiple initiatives designed to reinvigorate the core business, capitalize on product adjacencies, reduce costs to fuel growth, and develop leading capabilities. Launched in 2017, Project Centennial is an enterprise-wide, multi-year effort to streamline operations, drive efficiencies, and invest in strategic capabilities that strengthen Flowers' competitive position, drive profitable revenue growth, and create shareholder value. As a result of a more efficient and productive organizational structure, reduced spending on purchased goods and services, continuous improvement, supply chain optimization, and improved ordering and stale reduction initiatives, the company is targeting total gross savings of $38 million to $48 million during fiscal 2018.

Highlights of the company's progress in 2018 include:

  • Appointment of a chief operating officer and continued refinements to the organizational structure that better align operating functions and enhance execution and accountability.
  • Acceleration of a wide-range of supply chain optimization initiatives for the third quarter that are expected to improve efficiencies, lower costs, and drive enhanced gross margins. Teams have been re-prioritized to focus on key areas of opportunity across the company to drive faster benefit realization.
  • Substantial brand investments to support the launch of Nature's Own Perfectly Crafted artisan-inspired, thick-sliced bakery breads and Dave's Killer Bread Boomin' Berry bagels.
  • A significant decrease in selling, distribution, and administrative (SD&A) workforce-related expenses due to organizational restructuring.
  • Implementation of enhanced working capital policies that improved the cash conversion cycle and generated incremental cash flow.

Matters Affecting Comparability:





Reconciliation of Earnings per Share to Adjusted Earnings per Share










For the 12 Weeks Ended




Jul. 14, 2018


Jul. 15, 2017








Net income per diluted common share

$         0.21


$         0.21


Project Centennial consulting costs

0.01


0.03


Pension plan settlement loss


 NM 


-


Legal settlement


0.03


-


Adjustment to prior year provisional tax reform benefit

(0.03)


-


Loss on inferior ingredients


0.02


-


Restructuring charges


 NM 


-


Adjusted net income per diluted common share

$         0.25


$         0.24








NM - Not Meaningful






Certain amounts may not compute due to rounding.




See reconciliations of non-GAAP measures in the financial




  statements following this release.




 

Consolidated Second Quarter 2018 Summary
Compared to the prior year second quarter where applicable

  • Sales increased 1.6% to $941.3 million.
  • Percentage point change in sales attributed to:
    • Pricing/mix: +0.4%
    • Volume: +1.2%
  • Net income increased 1.6% to $45.4 million. Excluding matters affecting comparability, net income increased 3.0% to $52.0 million.
  • Operating income decreased 23.9% to $52.3 million. Excluding matters affecting comparability, operating income decreased 13.6% to $67.5 million.
  • Adjusted EBITDA decreased 9.5% to $102.9 million, or 10.9% of sales, a 140 basis point decline.
  • Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 51.9% of sales, a 140 basis point increase. This increase was primarily driven by significant promotional activity related to new product launches in the quarter, operational disruptions related to inferior yeast, increases in outside purchases of product due to strong demand for DKB breakfast items and replacement product related to inferior yeast, higher ingredient costs and decreases in manufacturing efficiencies, partially offset by favorable price/mix.
  • SD&A expenses were 38.3% of sales, a 10 basis point decrease. Lower Project Centennial consulting costs and decreased workforce-related costs, as a percentage of sales, were partially offset by higher distributor distribution fees due to a larger portion of sales being sold via independent distributors and significantly higher marketing costs associated with the launch of Nature's Own Perfectly Crafted bread. Additionally, higher legal settlements and transportation costs in the current quarter partially offset the decrease in SD&A expenses.
  • Depreciation and Amortization (D&A) expenses were $35.1 million, 3.7% of sales, flat with the prior year second quarter.

On a consolidated basis, branded retail sales increased 1.5% to $557.7 million, store branded retail sales increased 3.5% to $149.6 million, while non-retail and other sales increased 0.6% to $234.0 million. Continued sales growth from branded organic products and in our expansion markets, as well as more favorable price/mix resulted in the increase in branded retail sales, partially offset by increased promotional activity primarily related to new product launches, decreased production capacity as a result of inferior yeast, and volume declines in other branded products. Sales of DKB branded products continued to increase, partly due to the introduction of breakfast products during the second quarter of fiscal 2017. Store branded retail sales increased from both positive price/mix and volume increases. Volume growth in vending drove the increase in non-retail and other sales, partially offset by softer bakery outlet store sales and declines in price/mix.

DSD Segment Summary
Compared to the prior year second quarter where applicable

  • Sales increased 0.5% to $796.6 million.
  • Percentage point change in sales attributed to:
    • Pricing/mix: 2.0%
    • Volume: -1.5%
  • Operating income decreased 31.4% to $54.5 million. In the quarter, the company recognized legal settlements, costs related to inferior yeast, and restructuring charges totaling $12.9 million.
  • Adjusted EBITDA decreased 10.4% to $97.6 million.

DSD Segment branded retail sales increased 1.4% to $521.9 million, store branded retail sales increased 1.3% to $121.5 million, while non-retail and other sales decreased 3.2% to $153.2 million. Branded retail sales increased due to significant sales growth for branded organic products, growth in our expansion markets, the launch of Nature's Own Perfectly Crafted bread, and improved price/mix. This increase was partially offset by costs related to increased promotional activity, decreased production capacity as a result of inferior yeast, and softer volume for other branded items. Sales of DKB branded products continue to increase, driven by volume gains and the addition of DKB branded breakfast products during the second quarter of fiscal 2017. Store branded retail sales increased quarter over quarter due to positive price/mix, partially offset by volume declines. Volume losses in foodservice, partly due to the inferior yeast issue and the shift of certain foodservice business from the DSD Segment to the Warehouse Segment, and decreased sales of products in our bakery outlet stores resulted in decreased non-retail and other sales.

The decrease in the DSD Segment operating income as a percent of sales primarily resulted from $8.3 million of legal settlements, $3.9 million of currently identifiable and measurable costs related to shipments of inferior yeast, and $0.7 million of restructuring charges incurred during the second quarter of fiscal 2018, as well as costs related to increased promotional activity, and new product launches, as well as increased production costs partially due to shipments of inferior yeast. The benefit of the voluntary separation incentive plan and other restructuring initiatives and lower employee fringes partially offset these items.

Warehouse Segment Summary
Compared to the prior year second quarter where applicable

  • Sales increased 8.2% to $144.7 million.
  • Percentage point change in sales attributed to:
    • Pricing/mix: -2.0%
    • Volume: 10.2%
  • Operating income decreased 3.9% to $11.1 million.
  • Adjusted EBITDA decreased 1.6% to $16.1 million.

Warehouse Segment branded retail sales increased 2.3% to $35.8 million, store branded retail sales increased 14.7% to $28.1 million, while non-retail and other sales increased 8.8% to $80.8 million. Branded retail sales increased mostly due to growth in branded cake, partially offset by volume declines in warehouse-delivered branded organic bread and negative pricing/mix. Sales of store branded retail items increased primarily due to volume increases in store branded cake. Non-retail and other sales, which include contract manufacturing, vending and foodservice, increased primarily from significant volume growth in foodservice and vending sales, and to a lesser extent the shift of certain foodservice business from the DSD Segment to the Warehouse Segment in the current year, partially offset by declines in contract manufacturing.

The decrease in the Warehouse Segment operating income as a percent of sales was primarily due to a shift in mix from higher margin branded bread items to lower margin cake and foodservice items, increased product purchases from the DSD Segment, increased outside purchases of product, declines in manufacturing efficiencies, and higher distribution costs, partially offset by lower workforce-related costs.

Unallocated Corporate Expense Summary
Note: Comparisons are to consolidated sales

  • Unallocated corporate expenses decreased 100 basis points to 1.4% of consolidated sales, primarily due to the $7.2 million decrease in Project Centennial consulting costs, and to a lesser extent, reduced legal expense.

Cash Flow, Dividends, Share Repurchases, and Capital Allocation
In the second quarter of fiscal 2018, cash flow from operating activities was $51.5 million (including a tax-advantaged voluntary pension contribution of $30 million), capital expenditures were $23.0 million, and dividends paid were $38.0 million.

There are 6.5 million shares remaining on the company's current share repurchase authorization. As in the past, the company expects to continue to make opportunistic share repurchases under this authorization.

Conference Call
Flowers Foods will hold a conference call to discuss its second quarter 2018 earnings at 8:30 a.m. (Eastern) on August 9, 2018. The call can be accessed by clicking on the webcast link on flowersfoods.com/investors. The call also will be archived on the company's website.

About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (NYSE:FLO) is one of the largest producers of fresh packaged bakery foods in the United States with 2017 sales of $3.9 billion. Flowers operates bakeries across the country that produce a wide range of bakery products. Among the company's top brands are Nature's Own, Wonder, Dave's Killer Bread, and Tastykake. Learn more at www.flowersfoods.com.

FLO-IR

Forward-Looking Statements
Statements contained in this press release that are not historical facts are forward-looking statements. Forward-looking statements relate to current expectations regarding our future financial condition, performance and results of operations, planned capital expenditures, long-term objectives of management, supply and demand, pricing trends and market forces, and integration plans and expected benefits of transactions 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. 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) general economic and business conditions and the competitive conditions in the baked foods industry, including promotional and price competition, (b) changes in consumer demand for our products, including changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store-branded 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, including as a result of product recalls or safety concerns related to our products, (e) fluctuations in commodity pricing, (f) energy and raw material costs and availability and hedging and counterparty risk, (g) our ability to fully integrate recent acquisitions into our business, (h) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value, (i) our ability to successfully implement our business strategies, including those strategies the company has initiated under Project Centennial, which may involve, among other things, the integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values, the deployment of new systems and technology and an enhanced organizational structure, (j) consolidation within the baking industry and related industries, (k) disruptions in our direct-store delivery system, including litigation or an adverse ruling from a court or regulatory or government body that could affect the independent contractor classification of our independent distributors, (l) increasing legal complexity and legal proceedings that we are or may become subject to, (m) product recalls or safety concerns related to our products, and (n) the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems. 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 public disclosures made by the company, including the risk factors included in our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and disclosures made in other filings with the SEC and company press releases, for other factors that may cause actual results to differ materially from those projected by the company. We caution you not to 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.

Information Regarding Non-GAAP Financial Measures
The company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). However, from time to time, the company may present in its public statements, press releases and SEC filings, non-GAAP financial measures such as, EBITDA, adjusted EBITDA, adjusted EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted operating income by segment, adjusted EBIT by segment, adjusted EPS, adjusted income tax expense, adjusted selling, distribution and administrative expenses (SD&A), gross margin excluding depreciation and amortization and the ratio of net debt to adjusted EBITDA. The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure. The company's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

The company defines EBITDA as earnings from continuing operations before interest, income taxes, depreciation, amortization and income attributable to non-controlling interest. The company believes that EBITDA is a useful tool for managing the operations of its business and is an indicator of the company's ability to incur and service indebtedness and generate free cash flow. EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation Plan. Furthermore, pursuant to the terms of our credit facility, EBITDA is used to determine the company's compliance with certain financial covenants. The company also believes that EBITDA measures are commonly reported and widely used by investors and other interested parties as measures of a company's operating performance and debt servicing ability because EBITDA measures assist in comparing performance on a consistent basis without regard to depreciation or amortization, which can vary significantly depending upon accounting methods and non-operating factors (such as historical cost). EBITDA is also a widely-accepted financial indicator of a company's ability to incur and service indebtedness.

EBITDA should not be considered an alternative to (a) income from operations or net income (loss) as a measure of operating performance; (b) cash flows provided by operating, investing and financing activities (as determined in accordance with GAAP) as a measure of the company's ability to meet its cash needs; or (c) any other indicator of performance or liquidity that has been determined in accordance with GAAP.

The company defines adjusted EBITDA, adjusted EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted operating income by segment, adjusted EBIT by segment, adjusted EPS, adjusted income tax expense, adjusted selling, distribution and administrative expenses (SD&A), respectively, excluding the impact of asset impairment charges, Project Centennial consulting costs, lease terminations and legal settlements, acquisition-related costs, and pension plan settlements. Adjusted income tax expense also excludes the impact of tax reform. The company believes that these measures, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges.

Net debt to EBITDA is used as a measure of financial leverage employed by the company. Gross margin excluding depreciation and amortization is used as a performance measure to provide additional transparent information regarding our results of operations on a consolidated and segment basis. Changes in depreciation and amortization are separately discussed and include depreciation and amortization for materials, supplies, labor and other production costs and operating activities.

Presentation of gross margin includes depreciation and amortization in the materials, supplies, labor and other production costs according to GAAP. Our method of presenting gross margin excludes the depreciation and amortization components, as discussed above.

The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure.

 

Flowers Foods, Inc.

Consolidated Statement of Operations

(000's omitted, except per share data)





























For the 12 Week

Period Ended


For the 12 Week

Period Ended



For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017



July 14, 2018


July 15, 2017

Sales

$

941,283

$

926,639


$

2,147,736

$

2,114,288

Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below)


488,871


468,246



1,113,993


1,076,314

Selling, distribution and administrative expenses


360,365


355,542



814,828


818,608

Gain on divestiture


-


-



-


(28,875)

Loss due to inferior ingredients


3,884


-



3,884


-

Restructuring charges


801


-



2,060


-

Impairment of assets 


-


-



2,483


-

Multi-employer pension plan withdrawal costs


-


-



2,322


-

Depreciation and amortization expense


35,098


34,128



79,287


81,316

Income from operations 


52,264


68,723



128,879


166,925

Other pension cost (benefit)


(298)


(1,443)



(1,033)


(3,366)

Pension plan settlement loss


1,035


-



5,703


-

Interest expense, net


1,748


3,278



4,649


8,326

Income before income taxes 


49,779


66,888



119,560


161,965

Income tax expense 


4,337


22,148



22,871


56,807

Net income 

$

45,442

$

44,740


$

96,689

$

105,158













Net income per diluted common share

$

0.21

$

0.21


$

0.46

$

0.50













Diluted weighted average shares outstanding


211,507


210,269



211,443


210,223













 

 

Flowers Foods, Inc.

Segment Reporting

(000's omitted)























For the 12 Week

Period Ended


For the 12 Week

Period Ended



For the 28 Week

Period Ended


For the 28 Week

Period Ended



July 14, 2018


July 15, 2017



July 14, 2018


July 15, 2017

Sales:










   Direct-Store-Delivery

$

796,626

$

792,892


$

1,812,110

$

1,792,752

   Warehouse Delivery


144,657


133,747



335,626


321,536


$

941,283

$

926,639


$

2,147,736

$

2,114,288











Gain on divestiture:










   Warehouse Delivery

$

-

$

-


$

-

$

(28,875)


$

-

$

-


$

-

$

(28,875)











Loss on inferior ingredients










   Direct-Store-Delivery

$

3,884

$

-


$

3,884

$

-


$

3,884

$

-


$

3,884

$

-











Restructuring charges:










   Direct-Store-Delivery

$

694

$

-


$

1,898

$

-

   Warehouse Delivery 


49


-



76


-

   Unallocated Corporate 


58


-



86


-


$

801

$

-


$

2,060

$

-











Impairment of assets:










   Direct-Store-Delivery

$

-

$

-


$

2,483

$

-


$

-

$

-


$

2,483

$

-











Multi-employer pension plan withdrawal costs:










   Direct-Store-Delivery

$

-

$

-


$

2,322

$

-


$

-

$

-


$

2,322

$

-











Depreciation and amortization expense:










   Direct-Store-Delivery

$

30,127

$

29,355


$

67,597

$

70,417

   Warehouse Delivery


4,902


4,761



11,527


11,072

   Unallocated Corporate


69


12



163


(173)


$

35,098

$

34,128


$

79,287

$

81,316











EBIT:










   Direct-Store-Delivery 

$

54,481

$

79,465


$

138,906

$

166,726

   Warehouse Delivery 


11,135


11,589



25,697


56,284

   Unallocated Corporate 


(13,352)


(22,331)



(35,724)


(56,085)


$

52,264

$

68,723


$

128,879

$

166,925











Pension plan settlement loss:










   Unallocated Corporate 

$

1,035

$

-


$

5,703

$

-


$

1,035

$

-


$

5,703

$

-











EBITDA:










   Direct-Store-Delivery

$

84,705

$

108,919


$

206,729

$

237,375

   Warehouse Delivery 


16,037


16,350



37,224


67,356

   Unallocated Corporate 


(14,117)


(20,975)



(40,457)


(53,124)


$

86,625

$

104,294


$

203,496

$

251,607











 

 

Flowers Foods, Inc.

Condensed Consolidated Balance Sheet

(000's omitted)
















July 14, 2018

Assets




     Cash and Cash Equivalents


$

29,554





     Other Current Assets



515,770





     Property, Plant & Equipment, net



716,254





     Distributor Notes Receivable (includes $25,603 current portion)



229,029





     Other Assets



33,423





     Cost in Excess of Net Tangible Assets, net



1,193,277





     Total Assets


$

2,717,307





Liabilities and Stockholders' Equity




     Current Liabilities


$

401,593





     Long-term Debt and Capital Leases (includes $9,706 current portion)


825,832





     Other Liabilities



191,947





     Stockholders' Equity



1,297,935





     Total Liabilities and Stockholders' Equity


$

2,717,307





 

 

Flowers Foods, Inc.

Condensed Consolidated Statement of Cash Flows

(000's omitted)


























For the 12 Week

Period Ended


For the 12 Week

Period Ended



For the 28 Week

Period Ended


For the 28 Week

Period Ended




July 14, 2018


July 15, 2017



July 14, 2018


July 15, 2017

Cash flows from operating activities:










Net income 

$

45,442

$

44,740


$

96,689

$

105,158

Adjustments to reconcile net income to net cash










  from operating activities:











Total non-cash adjustments


53,202


35,954



115,386


62,174


Changes in assets and liabilities and pension contributions


(47,133)


10,352



(63,452)


5,635

Net cash provided by operating activities


51,511


91,046



148,623


172,967

Cash flows from investing activities:











Purchase of property, plant and equipment 


(22,984)


(14,454)



(49,534)


(31,919)


Divestiture of assets


-


-



-


41,230


Proceeds from sale of property, plant and equipment 


791


983



1,290


1,312


Other


577


(1,179)



(801)


(2,841)

Net cash provided by (disbursed for) investing activities


(21,616)


(14,650)



(49,045)


7,782

Cash flows from financing activities:











Dividends paid


(38,045)


(35,716)



(74,288)


(69,601)


Exercise of stock options


-


167



791


6,416


Stock repurchases


-


(520)



(2,489)


(2,671)


Net change in debt borrowings


(1,250)


(44,150)



(2,500)


(108,100)


Other


4,738


4,489



3,333


(6,024)

Net cash disbursed for financing activities


(34,557)


(75,730)



(75,153)


(179,980)

Net increase (decrease) in cash and cash equivalents


(4,662)


666



24,425


769

Cash and cash equivalents at beginning of period


34,216


6,513



5,129


6,410

Cash and cash equivalents at end of period

$

29,554

$

7,179


$

29,554

$

7,179












 

Flowers Foods, Inc.

Reconciliation of GAAP to Non-GAAP Measures


(000's omitted, except per share data)
















Reconciliation of Earnings per Share to Adjusted Earnings per Share





For the 12 Week

 Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Net income per diluted common share


$                           0.21


$                           0.21


$                           0.46


$                           0.50


Gain on divestiture


-


-


-


(0.09)


Loss on inferior ingredients


0.02


-


0.02


-


Restructuring charges


 NM 


-


 NM 


-


Project Centennial consulting costs


0.01


0.03


0.03


0.07


Legal settlements and lease terminations 


0.03


-


0.03


 NM 


Pension plan settlement loss


 NM 


-


0.02


-


Multi-employer pension plan withdrawal costs


-


-


0.01


-


Adjustment to prior year provisional tax reform benefit


(0.03)


-


(0.03)


-


Adjusted net income per diluted common share


$                           0.25


$                           0.24


$                           0.55


$                           0.49


NM - not meaningful.










Certain amounts may not add due to rounding.
























Reconciliation of Gross Margin





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017


Sales


$                    941,283


$                    926,639


$                2,147,736


$                2,114,288


Materials, supplies, labor and other production costs (exclusive of depreciation and amortization)


488,871


468,246


1,113,993


1,076,314


Gross Margin excluding depreciation and amortization


452,412


458,393


1,033,743


1,037,974


Less depreciation and amortization for production activities


18,903


19,740


44,188


47,615


Gross Margin


$                    433,509


$                    438,653


$                    989,555


$                    990,359













Depreciation and amortization for production activities


$                      18,903


$                      19,740


$                      44,188


$                      47,615


Depreciation and amortization for selling, distribution and administrative activities


16,195


14,388


35,099


33,701


Total depreciation and amortization


$                      35,098


$                      34,128


$                      79,287


$                      81,316
















Reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Net income 


$                      45,442


$                      44,740


$                      96,689


$                    105,158


Income tax expense 


4,337


22,148


22,871


56,807


Interest expense, net


1,748


3,278


4,649


8,326


Other pension cost (benefit)


(298)


(1,443)


(1,033)


(3,366)


Pension plan settlement loss


1,035


-


5,703


-


Earnings before interest and income taxes


52,264


68,723


128,879


166,925


Gain on divestiture


-


-


-


(28,875)


Loss on inferior ingredients


3,884


-


3,884


-


Restructuring charges


801


-


2,060


-


Project Centennial consulting costs


2,215


9,389


8,647


24,795


Legal settlements and lease terminations 


8,345


-


9,695


815


Multi-employer pension plan withdrawal costs


-


-


2,322


-


Adjusted EBIT


67,509


78,112


155,487


163,660


Other pension cost (benefit)


298


1,443


1,033


3,366


Depreciation and amortization


35,098


34,128


79,287


81,316


Lease termination depreciation impact


-


-


-


(1,844)


Adjusted EBITDA


$                    102,905


$                    113,683


$                    235,807


$                    246,498













Sales


$                    941,283


$                    926,639


$                2,147,736


$                2,114,288


Adjusted EBITDA margin


10.9%


12.3%


11.0%


11.7%
















Reconciliation of Income Tax Expense to Adjusted Income Tax Expense





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Income tax expense 


$                         4,337


$                      22,148


$                      22,871


$                      56,807


Tax impact of:










Gain on divestiture


-


-


-


(11,117)


Loss on inferior ingredients


981


-


981


-


Restructuring charges


202


-


520


-


Project Centennial consulting costs


559


3,615


2,183


9,546


  Legal settlements and lease terminations 


2,107


-


2,448


314


Pension plan settlement loss


261


-


1,440


-


Multi-employer pension plan withdrawal costs


-


-


586


-


  Adjustment to prior year provisional tax reform benefit


5,575


-


5,575


-


Adjusted income tax expense


$                      14,022


$                      25,763


$                      36,604


$                      55,550
















Reconciliation of Net Income to Adjusted Net Income





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Net income 


$                      45,442


$                      44,740


$                      96,689


$                    105,158


Gain on divestiture


-


-


-


(17,758)


Loss on inferior ingredients


2,903


-


2,903


-


Restructuring charges


599


-


1,540


-


Project Centennial consulting costs


1,656


5,774


6,464


15,249


Legal settlements and lease terminations 


6,238


-


7,247


501


Pension plan settlement loss


774


-


4,263


-


Multi-employer pension plan withdrawal costs


-


-


1,736


-


Adjustment to prior year provisional tax reform benefit


(5,575)


-


(5,575)


-


Adjusted net income


$                      52,037


$                      50,514


$                    115,267


$                    103,150
















Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - DSD





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Earnings before interest and income taxes


$                      54,481


$                      79,465


$                    138,906


$                    166,726


Loss on inferior ingredients


3,884


-


3,884


-


Restructuring charges


694


-


1,898


-


Legal settlements and lease terminations 


8,345


-


9,695


815


Multi-employer pension plan withdrawal costs


-


-


2,322


-


Adjusted EBIT


67,404


79,465


156,705


167,541


Depreciation and amortization


30,127


29,355


67,597


70,417


Depreciation on lease terminations


-


-


-


(1,844)


Other pension cost (benefit)


97


99


226


232


Adjusted EBITDA


$                      97,628


$                    108,919


$                    224,528


$                    236,346













Sales


$                    796,626


$                    792,892


$                1,812,110


$                1,792,752


Adjusted EBITDA margin


12.3%


13.7%


12.4%


13.2%
















Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Warehouse Delivery





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Earnings before interest and income taxes


$                      11,135


$                      11,589


$                      25,697


$                      56,284


Gain on divestiture


-


-


-


(28,875)


Restructuring charges


49


-


76


-


Adjusted EBIT


11,184


11,589


25,773


27,409


Depreciation and amortization


4,902


4,761


11,527


11,072


Adjusted EBITDA


$                      16,086


$                      16,350


$                      37,300


$                      38,481













Sales


$                    144,657


$                    133,747


$                    335,626


$                    321,536


Adjusted EBITDA margin


11.1%


12.2%


11.1%


12.0%
















Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Corporate





For the 12 Week

Period Ended


For the 12 Week

Period Ended


For the 28 Week

Period Ended


For the 28 Week

Period Ended





July 14, 2018


July 15, 2017


July 14, 2018


July 15, 2017













Earnings before interest and income taxes


$                    (13,352)


$                    (22,331)


$                    (35,724)


$                    (56,085)


Restructuring charges


58


-


86


-


Project Centennial consulting costs


2,215


9,389


8,647


24,795


Adjusted EBIT


$                    (11,079)


$                    (12,942)


$                    (26,991)


$                    (31,290)


Depreciation and amortization


69


12


163


(173)


Other pension cost (benefit)


201


1,344


807


3,134


Adjusted EBITDA


$                    (10,809)


$                    (11,586)


$                    (26,021)


$                    (28,329)
















Reconciliation of Earnings per Share - Full Year Fiscal 2018 Guidance









Range Estimate

















Net income per diluted common share


$                           0.91

to

$                           0.97






Project Centennial reorganization and consulting costs


0.04


0.05






Loss on inferior ingredients


0.02


0.02






Legal settlements


0.03


0.03






Pension plan settlement loss


0.02


0.02






Multi-employer pension plan withdrawal costs


0.01


0.01






Adjustment to prior year provisional tax reform benefit


(0.03)


(0.03)






Adjusted net income per diluted common share


$                           1.00

to

$                           1.07






 


Flowers Foods, Inc.


Sales Bridge


































Net


Total Sales



For the 12 Week Period Ended July 14, 2018

Volume

Price/Mix

Divestiture

Change










Direct-Store-Delivery

-1.5%

2.0%

0.0%

0.5%










Warehouse Delivery

10.2%

-2.0%

0.0%

8.2%










Total Flowers Foods

1.2%

0.4%

0.0%

1.6%








































Net


Total Sales



For the 28 Week Period Ended July 14, 2018

Volume

Price/Mix

Divestiture

Change










Direct-Store-Delivery

-1.7%

2.8%

0.0%

1.1%










Warehouse Delivery

7.5%

-2.8%

-0.3%

4.4%










Total Flowers Foods

0.5%

1.1%

0.0%

1.6%
















 

Cision View original content:http://www.prnewswire.com/news-releases/flowers-foods-inc-reports-second-quarter-2018-results-300694332.html

SOURCE Flowers Foods, Inc.

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