Milling & Baking News - August 23, 2011 - 36

Financial Results 

plan we shared at our analyst event in March, because it brings growth opportunities in new markets in the mid-Atlantic and Northeast for our THOMASVILLE, GA. — Cost increases later in the year. Both of these issues Nature’s Own brand as well as new and sales mix pressured gross margin are being addressed and we expect markets for the Tastykake brand in at Flowers Foods, Inc. in the second improvement in the remaining the South and Southwest. We continue to believe market expansions, quarter, contributing to a decline in quarters of 2011. “A prolonged and slow economic acquisitions, and further industry earnings during the period. Net income in the second quarter ended July 16 recovery, compounded by higher consolidation offer significant growth was $28,210,000, equal to 21c per share costs, has continued to pressure opportunities for Flowers Foods.” Gross margin as a per cent of sales for on the common stock, down 16% from consumer buying as well as $33,756,000, or 24c per share, in the business operations. While these the second quarter was 46.8%, which same period a year ago. Excluding one- macroeconomic factors can create compared with 47.6% in last year’s time costs of $3.2 million related to the short-term fluctuations in results, second quarter. The decrease was due acquisition of Tasty Baking, e.p.s. in the our team is managing through those primarily to an increase in ingredient issues by improving operations, and packaging costs as a per cent of most recent quarter was 23c. Sales in the quarter were reducing costs, and achieving the sales, partially offset by decreases in $642,596,000, up 6% from $607,716,000 pricing necessary to keep our margins workforce-related costs as a per cent of sales, Flowers said. Meanwhile, in the same period a year ago. the increase in ingredient costs The increase was attributable ‘A prolonged and slow was primarily attributable to to favorable pricing/mix of flour, sweeteners, shortening 4.5 percentage points and economic recovery, and cocoa. contribution from the Tasty compounded by higher Selling, distribution and Baking acquisition of 3.3 points, costs, has continued to administrative costs as a per partially offset by decreased cent of sales for the quarter volume of 2.1 points. pressure consumer buying were 36.8% compared with “In the second quarter, we as well as business operations.’ 35.9% in the same quarter last delivered solid top-line results — George E. Deese, chairman year. Flowers attributed the and continued to focus on and chief executive ofﬁcer increase of 90 basis points as strategies to position Flowers a per cent of sales to one-time Foods favorably over the long term,” said George E. Deese, within our target range. Despite these pre-tax costs of $4.5 million associated chairman of the board and chief pressures, we have confidence that with the Tasty acquisition. Operating margin as a per cent of executive officer. “Sales growth our operating strategies are sound was driven by a combination of and our growth targets attainable sales for the quarter was 6.7%, which compared with 8.4% in last year’s good performance in our branded over the long term.” Mr. Deese said integration of Tasty second quarter. EBITDA as a per cent retail business and the contribution from the Tasty acquisition. From Baking “is well under way,” and of sales for the second quarter was an earnings perspective, the D.S.D. the company has begun to roll out 10%, which compared with 11.7% for the same quarter last year. segment performed well, although Tastykakes in D.S.D. markets. In an Aug. 17 conference call with “In mid-July, delivery of Tastykakes cost increases and sales mix pressured gross margin. In the warehouse through the company’s distribution analysts, Mr. Deese said Flowers plans segment, margins were impacted as system started in most of Florida, to offset higher costs in a variety of ways, Alabama, and South including implementing cost savings pricing lagged significantly higher Georgia, ingredient costs and by an unforeseen Carolina,” he said. “Tasty Baking initiatives. To that end, the company in shift of certain planned volume to fits nicely into the five-year growth the second quarter started up a new bun line, enlarged a bun line in its northern region, and looked at inefficient plants. “We continue to see how can we consolidate production lines, and we proved that by closing one of our mix plants and consolidated production PHILADELPHIA — Flowers Foods Inc. said it will cut 32 jobs at the former corporate headquarters into one facility,” Mr. Deese said. of Tasty Baking Co. in Philadelphia, a move that reﬂects overlap and redundancies in the company, For the first six months of fiscal 2011 said Paul Ridder, president of Tasty Baking. net income was $69,371,000, or 51c per Thomasville, Ga.-based Flowers Foods completed its $34.4 million acquisition of Tasty Baking share, down 7% from $74,443,000, or in May. Flowers Foods, whose brands include Nature’s Own and Bunny bread, has about 8,800 54c per share, in the same period a year employees at its 39 bakeries. ago. Sales rose 3% to $1,444,421,000 “As is often the case when two publicly-traded companies merge, we found overlap and from $1,402,742,000. redundancy in ofﬁce functions,” Mr. Ridder said, referring to the company’s merger with Flowers Looking ahead to the remainder Foods, Inc. earlier this year. “While we anticipated that this would be the case, it is still very difﬁcult of fiscal 2011, Mr. Deese said the not only because we appreciate the service these individuals have given our company, but because company expects sales growth of 7% we know it affects them and their families.” to 11%, including the Tasty acquisition. Mr. Ridder said Tastykakes are being made in bakeries in Philadelphia and Oxford, Pa., and the Capital expenditures are expected to company’s focus remains on producing and delivering fresh and delicious snack cakes. MBN be $85 million to $90 million. MBN

Flowers earnings slide 16% as cost increases, sales mix pressure margins

Flowers to cut 32 jobs at Tasty ofﬁces in Philadelphia

36 / August 23, 2011 Milling & Baking News

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Milling & Baking News - August 23, 2011

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