Milling & Baking News - August 28, 2007 - 34

Financial Results

Scoring double-digit earnings
growth, Flowers raises guidance
THOMASVILLE, GA. - With fiscal 2007 at the halfway point, Flowers
Foods, Inc. has raised earnings guidance
for the full year to a range of $85 million
to $94 million, up from previous guidance of $81 million to $87 million and up
13% to 25% from $75 million in 2006.
Net income of Flowers Foods in

were $477,838,000, up 7%.
Responsible for the 7.2% increase in
second-quarter sales were 5.6 points
from higher pricing and 1.8 points
from a positive mix shift.
"Unit volume was down slightly
year over year as the decline in single
unit snack cakes offset gains in loaf

Own remains the best selling soft variety bread in the country. Our newest
brand extension, Nature's Own All
Natural Premium breads, continues to
experience strong growth. In the quarter, sales grew in strong double digits.
Our branded buns and rolls were up
5% for the quarter."
Flowers Specialty Group EBIT in
the second quarter was $6,882,000 on
sales of $91,540,000, up 84% and 4.8%,
respectively, from the second quarter

Flowers Foods guidance revision
(figures in millions, except per share)

Sales
Net margin
Net earnings
Net earnings per share

New range for 2007
Change
High from 2006
$2,040
8%
4.6%
NA
$93.8
25%
$1.02
26%

the second quarter ended July 14
was $22,190,000, equal to 24c per
share on the common stock, up 13%
from $19,724,000, or 21c, during the
second quarter last year. Net sales

George K. Baum
Advisors' Nationally
Recognized Food &
Agriculture Practice

·
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Serving the
industry through:
M&A Advisory
Divestitures
Recapitalizations
Private Capital Raising

PLAZA COLONNADE
4801 MAIN STREET, SUITE 510
KANSAS CITY, MO 64112
(816)474-1100
www.gkbaum.com

34 / August 28, 2007

Milling & Baking News

Old range
Low
$2,020
4.2%
$84.8
$0.92

Change
from 2006
7%
NA
13%
14%

High
$2,040
4.4%
$87.0
$0.95

bread units and multi-pack snack cake
units," Flowers said.
Gross margin during the second
quarter declined by one percentage
point to 48.7%. The positive effects
of higher prices were offset by higher
stale cost from new product introductions and promotional price allowances. Margins also were hurt by
higher production costs that included
the effects of price increases for flour,
gluten and sweeteners. Margins a year
earlier were bolstered by a $1 million
insurance payment in connection with
damage caused by Hurricane Katrina.
Conversely, selling, marketing and
administrative costs as a percentage
of sales fell 1.1 percentage points to
38.4%, reflecting higher prices for the
company's products and the effects of
distribution rationalization that helped
move production capacity "closer to
the market," the company said.
Flowers Bakeries Group income before interest and taxes in the second
quarter was $33,354,000 on sales of
$386,298,000, up 3.8% and 8%, respectively, from the second quarter last year.
In the first six months of 2007, the division's EBIT was $78,471,000 on sales
of $875,310,000, up 11% and 8%, respectively, in the same period last year.
In an Aug. 16 conference call, George
E. Deese, chairman, president and chief
executive officer, said white bread sales,
which include its Nature's Own Whitewheat bread, grew by 4.4%.
"Sales of Nature's Own variety
breads continue to be very strong,
well ahead of the soft variety bread
category," Mr. Deese said. "Nature's

Change
from 2006
Low
8%
$1,983
NA
4.0%
16%
$81.0
17%
$0.89

Change
2006
from 2006 Final
5%
$1,889
NA
4.0%
8%
$74.9
10%
$0.81

last year. In the six months ended July
14, the group's EBIT was $15,013,000
on sales of $212,475,000, up 72% and
6%, respectively, from last year.
Looking ahead to the company's
plans more generally, Mr. Deese said
Flowers plans to introduce additional
varieties under the Nature's Own label
as well as better-for-you snack products
and 100-calorie per serving items.
In addition to new products, expansion into new markets and growth in
existing markets, Mr. Deese said Flowers was seeking "acquisitions that will
bring us new markets."
Also during the conference call, discussion turned repeatedly to the high
cost of ingredients. Jimmy Woodward,
Flowers senior vice-president and chief
financial officer, said Flowers has begun
taking ingredient market coverage for
2008 in steps started "numerous weeks
ago." He noted liquidity issues hamper
the company's ability to take extensive
distant forward coverage.
Noting that input costs, including packaging and natural gas, were
about $50 million higher in 2007 than
in 2006, he said the company is anticipating a similar further increase for
2008 from 2007.
To deal with the higher costs, Flowers raised prices about 3% in recent
weeks and plans another 3% price
hike in January 2008 if conditions warrant, Mr. Deese said.
Year-to-date net income at Flowers
Foods was $50,683,000, equal to 55c per
share on the common stock, up 19%
from $42,638,000, or 45c per share. Net
sales were $1,087,785,000, up 8%. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - August 28, 2007

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