FLOWERS FOODS, INC. REPORTS FIRST QUARTER 2024 RESULTS
First Quarter Summary:
Compared to the prior year first quarter where applicable
- Sales increased 2.8% to a first-quarter record,
$1.577 billion . - Net income increased 3.3% to
$73.0 million , primarily due to moderating input costs and price increases implemented in the prior year, partly offset by higher selling, distribution, and administrative expenses. Adjusted net income(1) decreased 0.8% to$80.3 million . - Adjusted EBITDA(1) increased 5.5% to
$159.4 million , representing 10.1% of sales, a 30-basis point increase. - Diluted EPS increased
$0.01 to$0.34 . Adjusted diluted EPS(1) was consistent with the prior year period at$0.38 .
Chairman and CEO Remarks:
"Our solid first quarter results highlight the increasing effectiveness of our portfolio strategy and investments in marketing and innovation," said Ryals McMullian, chairman and CEO of
"We are maintaining our 2024 outlook, which incorporates continued volume improvement while acknowledging the ongoing economic uncertainty and its potential impact on consumer behavior and the promotional environment. Our full-year results are also expected to benefit from an expansion of our savings initiatives and new business wins. Looking ahead, we remain focused on building continued momentum while capitalizing on more favorable trends in the bread category. We remain confident that our portfolio strategy will enable further progress and performance in line with our long-term financial targets."
For the 52-week Fiscal 2024, the Company Expects:
- Sales in the range of approximately
$5.091 billion to$5.172 billion , representing 0.0% to 1.6% growth compared to the prior year. - Adjusted EBITDA(2) in the range of approximately
$524 million to$553 million . - Adjusted diluted EPS(1) in the range of approximately
$1.20 to$1.30 .
The company's outlook is based on the following assumptions:
- Depreciation and amortization in the range of
$160 million to$165 million . - Net interest expense of approximately
$22 million to$26 million . - An effective tax rate of approximately 25%.
- Weighted average diluted share count for the year of approximately 213 million shares.
- Capital expenditures in the range of
$145 million to$155 million , with$3 million to$6 million related to the ERP upgrade, compared to prior guidance of$120 million to$130 million .
Matters Affecting Comparability:
Reconciliation of Earnings per Share to Adjusted Earnings per Share |
|
|||||||
|
|
|||||||
|
|
For the 16-Week |
|
|
For the 16-Week |
|
||
|
|
|
|
|
|
|
||
Net income per diluted common share |
|
$ |
0.34 |
|
|
$ |
0.33 |
|
Business process improvement costs |
|
|
0.01 |
|
|
|
0.02 |
|
Impairment of assets |
|
|
0.01 |
|
|
|
— |
|
Restructuring charges |
|
NM |
|
|
|
0.01 |
|
|
Restructuring-related implementation costs |
|
NM |
|
|
|
— |
|
|
Acquisition-related costs |
|
|
— |
|
|
|
0.01 |
|
Adjusted net income per diluted common share |
|
$ |
0.38 |
|
|
$ |
0.38 |
|
NM - not meaningful.
|
||||||||
Certain amounts may not add due to rounding.
|
Consolidated First Quarter Operating Highlights
Compared to the prior year first quarter where applicable
- Sales increased 2.8% to
$1.577 billion , a first-quarter record. Pricing/mix(3) increased 3.1%, volume(4) declined 0.8%, and the Papa Pita acquisition added 0.5%.- Branded Retail sales increased
$34.4 million or 3.5% to$1.015 billion due to pricing actions taken in the prior year, improved mix from greater branded organic product sales, and the acquisition contribution. Pricing/mix(3) rose 2.6%, volume(4) increased 0.3%, and the Papa Pita acquisition added 0.6%. - Other sales increased
$7.9 million or 1.4% to$561.9 million due to pricing actions taken in the prior year and the acquisition contribution, partially offset by volume declines related to business rationalizations. Pricing/mix(3) rose 3.3%, volume(4) declined 2.2%, and the Papa Pita acquisition added 0.3%.
- Branded Retail sales increased
- Materials, supplies, labor, and other production costs (exclusive of depreciation and amortization) were 50.6% of sales, a 160-basis point decrease. These costs decreased as a percentage of sales due to prior year inflation-driven pricing actions and moderating ingredient and packaging costs, partially offset by higher labor costs.
- Selling, distribution, and administrative (SD&A) expenses were 39.7% of sales, a 110-basis point increase. Increased labor and technology expenses were partly offset by lower distributor distribution fees as a percentage of sales. Excluding matters affecting comparability, adjusted SD&A expenses were 39.3% of sales, a 130-basis point increase, due to the factors listed above.
- Restructuring charges were
$0.6 million , or 0.0% of sales, compared to$4.2 million , or 0.3% of sales in the prior year quarter. - The company recognized impairments of
$4.0 million that represented 0.3% of sales for a cost method investment. - Depreciation and amortization (D&A) expenses were
$48.2 million or 3.1% of sales, a 20-basis point increase. - Net interest expense increased
$1.7 million primarily due to higher average amounts of debt outstanding, increased interest rates on that debt, and relatively lower interest income. - Net income increased 3.3% to
$73.0 million . Adjusted net income(1) decreased 0.8% to$80.3 million . - Adjusted EBITDA(1) increased 5.5% to
$159.4 million , representing 10.1% of sales, a 30-basis point increase.
Cash Flow, Capital Allocation, and Capital Return
For the first quarter of fiscal 2024, cash flow from operating activities increased
(1) |
Adjusted for items affecting comparability. See reconciliations of non-GAAP measures in the financial statements following this release. Earnings are net income. EBITDA and Adjusted EBITDA are reconciled to net income. |
(2) |
No reconciliation of the forecasted range for adjusted EBITDA to net income for the 52-week Fiscal 2024 is included in this press release because the company is unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliation would imply a degree of precision that would be confusing or misleading to investors. |
(3) |
Calculated as (current year period units X change in price per unit) / prior year period sales dollars |
(4) |
Calculated as (prior year period price per unit X change in units) / prior year period sales dollars |
Pre-Recorded Management Remarks and Question and Answer Webcast
In conjunction with this release, pre-recorded management remarks and a supporting slide presentation will be posted to the
About
Headquartered in
Forward-Looking Statements
Statements contained in this press release and certain other written or oral statements made from time to time by
Information Regarding Non-GAAP Financial Measures
The company prepares its consolidated financial statements in accordance with
The company defines EBITDA as earnings before interest, taxes, depreciation and amortization. Earnings are net income. 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. 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 EBITDA margin, adjusted net income, adjusted diluted EPS, adjusted income tax expense and adjusted SD&A, respectively, to exclude additional costs that the company considers important to present to investors to increase the investors' insights about the company's core operations. These costs include, but are not limited to, the costs of closing a plant or costs associated with acquisition-related activities, restructuring activities, certain impairment charges, legal settlements, costs to implement an enterprise resource planning system and enhance bakery digital capabilities (business process improvement costs) to provide investors direct insight into these costs, and other costs impacting past and future comparability. 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. Adjusted EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation Plan (Amended and Restated Effective
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.
Condensed Consolidated Balance Sheets |
|
|||||||
(000's omitted) |
|
|||||||
|
|
|||||||
|
|
|
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
15,818 |
|
|
$ |
22,527 |
|
Other current assets |
|
|
661,975 |
|
|
|
655,422 |
|
Property, plant and equipment, net |
|
|
959,096 |
|
|
|
962,981 |
|
Right-of-use leases, net |
|
|
294,539 |
|
|
|
276,864 |
|
Distributor notes receivable (1) |
|
|
128,802 |
|
|
|
133,335 |
|
Other assets |
|
|
41,014 |
|
|
|
40,286 |
|
Cost in excess of net tangible assets, net |
|
|
1,327,922 |
|
|
|
1,335,538 |
|
Total assets |
|
$ |
3,429,166 |
|
|
$ |
3,426,953 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities |
|
$ |
564,631 |
|
|
$ |
611,546 |
|
Long-term debt |
|
|
1,043,543 |
|
|
|
1,048,144 |
|
Right-of-use lease liabilities (2) |
|
|
305,190 |
|
|
|
284,501 |
|
Other liabilities |
|
|
139,922 |
|
|
|
130,980 |
|
Stockholders' equity |
|
|
1,375,880 |
|
|
|
1,351,782 |
|
Total liabilities and stockholders' equity |
|
$ |
3,429,166 |
|
|
$ |
3,426,953 |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes current portion of |
(2) |
Includes current portion of |
Consolidated Statement of Operations |
|
|||||||
(000's omitted, except per share data) |
|
|||||||
|
|
|||||||
|
|
For the 16-Week Period |
|
|
For the 16-Week Period |
|
||
|
|
|
|
|
|
|
||
Sales |
|
$ |
1,576,818 |
|
|
$ |
1,534,493 |
|
Materials, supplies, labor and other production costs (exclusive of |
|
|
797,186 |
|
|
|
800,852 |
|
Selling, distribution, and administrative expenses |
|
|
625,251 |
|
|
|
591,943 |
|
Restructuring charges |
|
|
598 |
|
|
|
4,195 |
|
Impairment of assets |
|
|
4,000 |
|
|
|
— |
|
Depreciation and amortization expense |
|
|
48,235 |
|
|
|
43,735 |
|
Income from operations |
|
|
101,548 |
|
|
|
93,768 |
|
Other pension benefit |
|
|
(158) |
|
|
|
(83) |
|
Interest expense, net |
|
|
5,611 |
|
|
|
3,886 |
|
Income before income taxes |
|
|
96,095 |
|
|
|
89,965 |
|
Income tax expense |
|
|
23,052 |
|
|
|
19,255 |
|
Net income |
|
$ |
73,043 |
|
|
$ |
70,710 |
|
Net income per diluted common share |
|
$ |
0.34 |
|
|
$ |
0.33 |
|
Diluted weighted average shares outstanding |
|
|
212,114 |
|
|
|
213,397 |
|
Condensed Consolidated Statement of Cash Flows |
||||||||
(000's omitted) |
||||||||
|
||||||||
|
|
For the 16-Week Period |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
73,043 |
|
|
$ |
70,710 |
|
Adjustments to reconcile net income to net cash from operating |
|
|
|
|
|
|
||
Total non-cash adjustments |
|
|
78,221 |
|
|
|
62,975 |
|
Changes in assets and liabilities |
|
|
(46,115) |
|
|
|
(75,733) |
|
Net cash provided by operating activities |
|
|
105,149 |
|
|
|
57,952 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property, plant and equipment |
|
|
(33,332) |
|
|
|
(33,958) |
|
Proceeds from sale of property, plant and equipment |
|
|
60 |
|
|
|
96 |
|
Acquisition of business |
|
|
— |
|
|
|
(270,451) |
|
Other |
|
|
(2,655) |
|
|
|
3,106 |
|
Net cash disbursed for investing activities |
|
|
(35,927) |
|
|
|
(301,207) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Dividends paid |
|
|
(51,106) |
|
|
|
(49,100) |
|
Stock repurchases |
|
|
(8,879) |
|
|
|
(10,981) |
|
Net change in debt borrowings |
|
|
(5,000) |
|
|
|
171,000 |
|
Payments on financing leases |
|
|
(95) |
|
|
|
(599) |
|
Other |
|
|
(10,851) |
|
|
|
(4,479) |
|
Net cash (disbursed for) provided by financing activities |
|
|
(75,931) |
|
|
|
105,841 |
|
Net decrease in cash and cash equivalents |
|
|
(6,709) |
|
|
|
(137,414) |
|
Cash and cash equivalents at beginning of period |
|
|
22,527 |
|
|
|
165,134 |
|
Cash and cash equivalents at end of period |
|
$ |
15,818 |
|
|
$ |
27,720 |
|
Sales by Sales Class and |
||||||||||||||||
(000's omitted) |
||||||||||||||||
|
||||||||||||||||
Sales by Sales Class |
||||||||||||||||
|
||||||||||||||||
Sales by Sales Class |
|
For the 16-Week Period |
|
|
For the 16-Week Period |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
$ Change |
|
|
% Change |
|
||||
Branded Retail |
|
$ |
1,014,901 |
|
|
$ |
980,479 |
|
|
$ |
34,422 |
|
|
|
3.5 |
% |
Other |
|
|
561,917 |
|
|
|
554,014 |
|
|
|
7,903 |
|
|
|
1.4 |
% |
Total Sales |
|
$ |
1,576,818 |
|
|
$ |
1,534,493 |
|
|
$ |
42,325 |
|
|
|
2.8 |
% |
|
||||||||||||
For the 16-week period ended |
|
Branded Retail |
|
|
Other |
|
|
Total |
|
|||
Pricing/mix* |
|
|
2.6 |
% |
|
|
3.3 |
% |
|
|
3.1 |
% |
Volume* |
|
|
0.3 |
% |
|
|
(2.2) |
% |
|
|
(0.8) |
% |
Acquisition |
|
|
0.6 |
% |
|
|
0.3 |
% |
|
|
0.5 |
% |
Total percentage point change in sales |
|
|
3.5 |
% |
|
|
1.4 |
% |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|||
* Computations above are calculated as follows (the Total column is consolidated and is not adding the Branded Retail and Other columns): |
|
|||||||||||
Price/Mix $ = Current year period units × change in price per unit |
|
|||||||||||
Price/Mix % = Price/Mix $ ÷ Prior year period Sales $ |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||
Volume $ = Prior year period price per unit × change in units |
|
|||||||||||
Volume % = Volume $ ÷ Prior year period Sales $ |
|
Reconciliation of GAAP to Non-GAAP Measures |
|
|||||||
(000's omitted, except per share data) |
|
|||||||
|
|
|||||||
|
|
Reconciliation of Earnings per Share to Adjusted Earnings per |
|
|||||
|
|
For the 16-Week Period Ended |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Net income per diluted common share |
|
$ |
0.34 |
|
|
$ |
0.33 |
|
Business process improvement costs |
|
|
0.01 |
|
|
|
0.02 |
|
Impairment of assets |
|
|
0.01 |
|
|
|
— |
|
Restructuring charges |
|
NM |
|
|
|
0.01 |
|
|
Restructuring-related implementation costs |
|
NM |
|
|
|
— |
|
|
Acquisition-related costs |
|
|
— |
|
|
|
0.01 |
|
Adjusted net income per diluted common share |
|
$ |
0.38 |
|
|
$ |
0.38 |
|
NM - not meaningful |
|
|
|
|
|
|
||
Certain amounts may not add due to rounding |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
Reconciliation of Gross Margin |
|
|||||
|
|
For the 16-Week Period |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Sales |
|
$ |
1,576,818 |
|
|
$ |
1,534,493 |
|
Materials, supplies, labor and other production costs (exclusive |
|
|
797,186 |
|
|
|
800,852 |
|
Gross margin excluding depreciation and amortization |
|
|
779,632 |
|
|
|
733,641 |
|
Less depreciation and amortization for production activities |
|
|
26,353 |
|
|
|
24,448 |
|
Gross margin |
|
$ |
753,279 |
|
|
$ |
709,193 |
|
Depreciation and amortization for production activities |
|
$ |
26,353 |
|
|
$ |
24,448 |
|
Depreciation and amortization for selling, distribution, and |
|
|
21,882 |
|
|
|
19,287 |
|
Total depreciation and amortization |
|
$ |
48,235 |
|
|
$ |
43,735 |
|
|
|
|||||||
|
|
Reconciliation of Selling, Distribution, and Administrative Expenses |
|
|||||
|
|
For the 16-Week Period Ended |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Selling, distribution, and administrative expenses |
|
$ |
625,251 |
|
|
$ |
591,943 |
|
Business process improvement costs |
|
|
(3,683) |
|
|
|
(6,219) |
|
Restructuring-related implementation costs |
|
|
(1,344) |
|
|
|
— |
|
Acquisition-related costs |
|
|
— |
|
|
|
(3,223) |
|
Adjusted SD&A |
|
$ |
620,224 |
|
|
$ |
582,501 |
|
Reconciliation of GAAP to Non-GAAP Measures |
|
|||||||
(000's omitted, except per share data) |
|
|||||||
|
|
|||||||
|
|
Reconciliation of Net Income to EBITDA and Adjusted EBITDA |
|
|||||
|
|
For the 16-Week Period Ended |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Net income |
|
$ |
73,043 |
|
|
$ |
70,710 |
|
Income tax expense |
|
|
23,052 |
|
|
|
19,255 |
|
Interest expense, net |
|
|
5,611 |
|
|
|
3,886 |
|
Depreciation and amortization |
|
|
48,235 |
|
|
|
43,735 |
|
EBITDA |
|
|
149,941 |
|
|
|
137,586 |
|
Other pension benefit |
|
|
(158) |
|
|
|
(83) |
|
Business process improvement costs |
|
|
3,683 |
|
|
|
6,219 |
|
Impairment of assets |
|
|
4,000 |
|
|
|
— |
|
Restructuring charges |
|
|
598 |
|
|
|
4,195 |
|
Restructuring-related implementation costs |
|
|
1,344 |
|
|
|
— |
|
Acquisition-related costs |
|
|
— |
|
|
|
3,223 |
|
Adjusted EBITDA |
|
$ |
159,408 |
|
|
$ |
151,140 |
|
Sales |
|
$ |
1,576,818 |
|
|
$ |
1,534,493 |
|
Adjusted EBITDA margin |
|
|
10.1 |
% |
|
|
9.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Income Tax Expense to Adjusted Income |
|
|||||
|
|
For the 16-Week Period Ended |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Income tax expense |
|
$ |
23,052 |
|
|
$ |
19,255 |
|
Tax impact of: |
|
|
|
|
|
|
||
Business process improvement costs |
|
|
921 |
|
|
|
1,555 |
|
Impairment of assets |
|
|
1,000 |
|
|
|
— |
|
Restructuring charges |
|
|
150 |
|
|
|
1,049 |
|
Restructuring-related implementation costs |
|
|
336 |
|
|
|
— |
|
Acquisition-related costs |
|
|
— |
|
|
|
806 |
|
Adjusted income tax expense |
|
$ |
25,459 |
|
|
$ |
22,665 |
|
Reconciliation of GAAP to Non-GAAP Measures (000's omitted, except per share data) |
|
|||||||
|
|
Reconciliation of Net Income to Adjusted Net Income |
|
|||||
|
|
For the 16-Week Period Ended |
|
|
For the 16-Week Period Ended |
|
||
|
|
|
|
|
|
|
||
Net income |
|
$ |
73,043 |
|
|
$ |
70,710 |
|
Business process improvement costs |
|
|
2,762 |
|
|
|
4,664 |
|
Impairment of assets |
|
|
3,000 |
|
|
|
— |
|
Restructuring charges |
|
|
448 |
|
|
|
3,146 |
|
Restructuring-related implementation costs |
|
|
1,008 |
|
|
|
— |
|
Acquisition-related costs |
|
|
— |
|
|
|
2,417 |
|
Adjusted net income |
|
$ |
80,261 |
|
|
$ |
80,937 |
|
|
|
Reconciliation of Earnings per Share - |
|
|||||
|
|
Range Estimate |
|
|||||
Net income per diluted common share |
|
$ |
1.16 |
|
to |
$ |
1.26 |
|
Business process improvement costs |
|
|
0.01 |
|
|
|
0.01 |
|
Impairment of assets |
|
|
0.01 |
|
|
|
0.01 |
|
Restructuring charges |
|
NM |
|
|
NM |
|
||
Restructuring-related implementation costs |
|
NM |
|
|
NM |
|
||
Adjusted net income per diluted common share |
|
$ |
1.20 |
|
to |
$ |
1.30 |
|
NM - not meaningful |
|
|
|
|
|
|
||
Certain amounts may not add due to rounding |
|
|
|
|
|
|
View original content:https://www.prnewswire.com/news-releases/flowers-foods-inc-reports-first-quarter-2024-results-302148034.html
SOURCE