Milling & Baking News - February 19, 2013 - 24

Financial Results 

Flowers executives offer peek
into Hostess shut down mayhem
THOMASVILLE, GA. — The abrupt
decision by Hostess Brands, Inc. to
cease operations and liquidate “put
Hostess retail and food service customers in a tailspin,” said George E.
Deese, chairman and chief executive
officer of Flowers Foods, Inc.
In a Feb. 7 conference call with investment analysts, Mr. Deese commented on the Hostess liquidation
and how Flowers responded to the
shortage of baked foods in the marketplace. The conference call was
held in connection with the release
of the company’s fourth-quarter
and full-year financial results for
2012 (see related story below).
“It is an understatement to say
that these are interesting times for
Flowers Foods and for the baking
industry,” Mr. Deese said. Still, Mr.
Deese and other Flowers executives
warned that for legal and competitive reasons they would be unable
to comment on many developments
currently unfolding for the company.
Flowers was able to benefit in the
fourth quarter from the departure
of Hostess in mid-November, company executives said.
“To fill the void, Flowers team

members and our distribution partners did an absolutely amazing job of
serving customers in the wake of this
market disruption,” Mr. Deese said.
Expanding on what transpired,
Allen L. Shiver, president, said the
timing of the shutdown heightened
the challenge facing
bakers and customers.
“As a reminder, that
was the Friday before
Thanksgiving,
the
start of one of the busiest weeks in the year
for our customers,” he
Deese
said. “It is not a time
when customers can afford to have
empty bakery shelves.
“The efforts of our team members
across every department and every
location were simply extraordinary
as we worked overnight to increase
production levels and provide the
additional service to take care of our
customers.”
In response to a question from an
analyst, Mr. Shiver said the Hostess
situation has translated into new
customers for Flowers.
“We did see quite a few additional new customers come on line

Flowers Foods 2012 proﬁts up;
not ready to issue ‘13 guidance
THOMASVILLE, GA. — Net income at Flowers Foods, Inc. in
the year ended Dec. 29, 2012, was
$136,121,000, equal to 98c per share
on the common stock, up 10% from
$123,428,000, or 90c per share, in
fiscal 2011. Adjusted for one-time
charges, fiscal 2012 e.p.s. was $1.03,
up 7% from 96c in fiscal 2011.
Sales in the year were $3,046,491,000,
up 10% from $2,773,356,000 in fiscal
2011. Flowers said the increase was
attributable to higher volume of 2.1
percentage points and favorable pricing/mix of 1.5 percentage points. Additionally, the acquisitions of Tasty
Baking Co. and Lepage Bakeries contributed 6.2 percentage points.
The company has delayed offering
specific guidance for fiscal 2013 until
it has more clarity on pending transactions (see related stories on Pages
1 and 24).
“Price/mix and volume increased
across all channels,” Flowers said.
24 / February 19, 2013 Milling & Baking News

“The volume increase was driven by
branded soft variety bread, branded
cake, store brand bread, buns and
rolls, and food service. These increases were partially offset by volume decreases in store brand cake.”
Flowers said sales of its Nature’s
Own brand reached approximately
$974 million in fiscal 2012, up from
$935 million in fiscal 2011.
For the fourth quarter ended Dec.
29, net income was $38,567,000, or 28c
per share, up 67% from $23,038,000,
or 17c per share, in the same period a year ago. Sales rose 15% to
$749,442,000 from $653,566,000.
Gross margin as a per cent of sales
for fiscal 2012 was 46.9%, which
was flat compared with fiscal 2011.
Higher ingredient costs as a per cent
of sales were offset by lower workforce-related costs as a per cent of
sales, production volume increases
and increased manufacturing efficiencies, Flowers said.

in the fourth quarter,” he said. “I
would say that continues, but not
at the rate that we saw in the fourth
quarter.”
Based on early 2013 data, Mr.
Shiver called the company’s sales
picture “encouraging” with a “rate
of growth (that) is continuing, and
in some areas, accelerating.”
Noting Flowers has been named
the stalking horse bidder for certain
Hostess assets, Mr. Deese said he
was not able to shed much light on
what will transpire.
“We cannot speculate on the
possible outcome of the auction
scheduled for Feb. 28,” he said. “It
is important to remember that any
transaction resulting from the auction will be subject to regulatory approval.”
While Mr. Deese and other Flowers executives restated that the
company was not yet prepared to
issue sales and earnings guidance
for 2013, they were very willing to
offer insights about the direction
financial results are headed in the
new year.
“We expect the year ’s results
to meet or exceed our long-term
goals,” Mr. Deese said.
Steve Kinsey, executive vice-president and chief financial officer, said
Continued on Page 26

The Flowers Direct-Store-Delivery segment had full-year EBIT of
$233,196,000, up 15% from $203,248,000
in fiscal 2011. Sales for the division
were $2,508,856,000, up 11% from
$2,265,244,000. Volume increased 1.5%,
while price/mix lifted sales 1.6% and
acquisitions boosted sales 7.7%.
The Warehouse Delivery segment of Flowers had full-year
EBIT of $36,230,000, up 32% from
$27,351,000. Sales were $537,635,000,
up nearly 6% from $508,112,000. Volume increased 3.6%, while price/
mix lifted sales 2.2%.
Flowers on Jan. 11 was named
the stalking horse bidder for certain
bread bakeries and bread brands of
Hostess Brands, Inc., Irving, Texas. A
competitive auction is scheduled for
Feb. 28, followed by a sale hearing
set for March 5. If Flowers’ bids are
approved, the transactions will remain subject to regulatory clearance.
Meanwhile, Flowers’ acquisition
of the Sara Lee and Earthgrains
brands for sliced bread, buns and
rolls in California is scheduled to be
finalized on Feb. 23. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - February 19, 2013

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