Milling & Baking News - November 20, 2018 - 18

Financial Results

Sales, profits still weak, Flowers
Foods pursues further change
THOMASVILLE, GA. - An agreement to designed to enhance performance and inacquire a gluten-free baker, organizational crease accountability," he said. "We are
changes and the start-up of a new high- continuing to take steps to optimize our
speed bun line were among steps taken supply chain, including the start-up of a
during the third quarter to enhance the fi- high-speed production bun line in Oxford,
nancial performance of Flowers Foods, Inc. Pa., and the closing of an inefficient bakery
The moves come against a difficult financial in Brattleboro, Vt. Extending our portfolio
backdrop with quarterly sales lighter than into adjacent product segments is a strateexpected and a decision by the company to gic priority, and today we announced the
acquisition of Canyon Bakehouse, a leading
further cut earnings guidance for 2018.
Net income of Flowers Foods in the third producer of gluten-free bakery products.
quarter ended Oct. 6 was $39,630,000, equal Gluten-free is a growing segment of the
to 19c per share on the common stock, ver- category and one where we believe we can
sus a loss of $33,571,000 during the
third quarter last year. Sales dur'Despite progress on our
ing the quarter were $923,449,000,
down 1% from $932,822,000.
strategic priorities, we are not
The same day the company ansatisfied with our performance
nounced its quarterly results it
this quarter.'
said it has reached an agreement
- Allen L. Shiver,
to acquire Canyon Bakehouse
Flowers Foods, Inc.
L.L.C., a gluten-free baking company, for about $205 million (see
leverage our powerful distribution network
story on Page 1).
Results in the third quarter included to grow enterprise grow enterprise value."
In early September, Flowers said thirda $1,891,000 recovery in connection with
inferior yeast products. For the year, the quarter sales were softer than expected,
company has lost $1,993,000, attributable and in announcing results for the quarter,
to inferior ingredients. In the third quarter the company cut its guidance for the full
of 2017, Flowers took restructuring and re- year. It was the second straight quarter
lated impairment charges of $100,549,000. in which Flowers lowered its forecasts.
Such charges in the third quarter of 2018 to- Earnings per share for the year are extaled only $497,000. Also in the third quarter pected at 90c to 95c, down from $1 to
of 2017, Flowers had multi-employer pen- $1.07 and as high as $1.16 in the spring.
sion plan withdrawal costs of $18,268,000, The sales for ecast was left unchanged at
$3,921 million to $3,982 million.
versus none in the same period of 2018.
"Despite progress on our strategic priAllen L. Shiver, president and chief
executive officer, said Flowers hit record orities, we are not satisfied with our performance this quarter," Mr. Shiver said. "We
market share in the third quarter.
"We also made organizational changes continue to face a challenging operating

J&J Snack earnings up 31%, sales
climb 5% in fiscal 2018
PENNSAUKEN, N.J. - Net income at
J&J Snack Foods in the year ended Sept.
29 totaled $103,596,000, equal to $5.54 per
share on the common stock, up 31% from
$79,174,000, or $4.23 per share, in fiscal 2017.
Fiscal 2018 results benefited from a $20.9
million gain on the re-measurement of deferred tax liabilities and an $8.8 million reduction in income taxes related primarily to
the lower corporate tax rate enacted under
the Tax Cuts and Jobs Act in December 2017.
Net sales increased nearly 5% to
$1,138,265,000 from $1,084,224,000.
Overall, total food service operating income at J&J Snack Foods decreased 9% in
fiscal 2018 to $74,056,000 from $81,208,000
18 / November 20, 2018

Milling & Baking News

in the same period a year ago. Sales, meanwhile, increased 6% to $745,944,000. Within
the food service division, sales of bakery
products totaled $371,391,000, up 6% from
the same period a year ago, while soft pretzel sales increased 16% to $208,544,000, and
churros increased 5% to $38,928,000.
In the retail supermarket segment, operating income totaled $8,304,000, down
22% from $10,627,000 a year ago. Total
sales in the retail supermarket segment
were $120,939,000, up narrowly from
$119,247,000 in the same period a year
ago. Within the retail supermarket division, sales of soft pretzels increased 4% to
$36,438,000. MBN

environment that impacted our thirdquarter financial results and our full-year
outlook. Sales in the quarter were down,
compared to the prior year, due to expected
losses of low-margin food service business,
lower hurricane-related volumes and disruptions related to inferior yeast. We expect
these headwinds to be transitory. Also impacting results in the quarter were inflationary cost pressures from commodities
and transportation. We are working to address these higher costs through pricing actions and our ongoing savings initiations."
Commenting during a Nov. 8 conference
call on sales trends in the third quarter, Mr.
Shiver said Dave's Killer Bread enjoyed
growth, and Flowers' top bread brands
gained market share - Nature's
Own, Wonder and D.K.B.
Perfectly Crafted, a new
brand within the Nature's Own
family, has performed well, Mr.
Shiver said. Other new products enjoying early success include D.K.B. organic bagels and
breakfast bread.
"We are further extending
our reach into breakfast with our recent
licensing agreement to produce and market Sun-Maid Raisin Bread," he said.
Mr. Shiver said it was the ninth consecutive quarter in which Flowers gained
share in the bread market.
"However, we did see branded retail
sales decline in the quarter," he said.
"This was driven by lower cake sales and
difficult comparisons due to multiple
hurricanes in the third quarter last year."
Turning back to the Flowers cake business, Mr. Shiver appeared to acknowledge that extended efforts to stem the loss
of market share have not been successful.
"We are going back to the basics and
taking actions to right-size this business,"
he said. "This year, the focus has been on
product assortment, pricing and quality.
To be sure, we are offering items with
clear consumer feel. With this work as the
foundation, our plan is to build new innovation and packaging platforms starting next year."
Asked about the potential for growth
in the Canyon Bakehouse line, R. Steve
Kinsey, chief financial officer and chief
administrative officer, said Flowers expects to build this business much the way
it did when D.K.B. was acquired.
"If you look at the opportunity compared
to organics or Dave's Killer Bread, I'd say
it's probably not the size of opportunity
you see with organics, but we still believe
there's great growth opportunities within
the gluten-free category," he said. "And we
believe that what you saw with D.K.B. and
the strength of D.S.D. that we'll be able to do
that as well in the gluten-free category." MBN
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Milling & Baking News - November 20, 2018

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