Milling & Baking News - February 12, 2008 - 12

Financial Results

Flowers Foods profit climbs 17% in '07
THOMASVILLE, GA. - At a time
when many baking companies have
struggled to sustain earnings in the
face of surging ingredient and other
costs, Flowers Foods, Inc. delivered
strong net income growth of 17% in
the year ended Dec. 29.
Net income in fiscal 2007 was
$94,615,000, equal to $1.02 per share
on the common stock, up from
$81,043,000, or 88c per share, in fiscal
2006. Net income for 2006 included a
gain from discontinued operations of
$6.7 million, or 11c per share. Sales for
the year were $2,036,674,000, up 8%
from $1,888,654,000.
Following the earnings announcement of improved income, the share
price rose nearly 9% on Jan. 31 in trading on the New York Stock Exchange
to $23.86.
"We posted another year of strong
sales and earnings growth," said
George E. Deese, chairman, chief executive and president. "Although we
faced significantly higher ingredient
costs, our team worked to increase
efficiencies and control our expenses
to help offset those costs. Because of
those efforts, our selling, marketing
and administrative costs as a per cent
of sales were lower, which helped us
deliver improved earnings."
In the fourth quarter, Flowers posted net income of $21,431,000 on sales
of $473,664,000, up from $15,836,000
on sales of $438,178,000, respectively,
in the same period a year ago.
The sales increase of 8% for fiscal
2007 reflected favorable pricing of
6%, favorable mix shifts of 2% and increased volume of 0.3%. The Bakeries
Group achieved sales growth of 9% behind increased pricing of 6%, volume
growth of 3%, and improved product
mix of 0.3%.
The Specialty Group posted 2007
fiscal sales growth of 3%. The growth

was driven by favorable pricing of
4.5% and a favorable mix shift of 3%,
which more than offset a 5% unit volume decrease. The volume decline
primarily was due to the shift from
single unit snack cakes to multi-pack
snack cakes.
Flowers Bakeries Group earnings before interest and taxes in
the year were $146,754,000, up
16% from $126,183,000 in fiscal 2006. Sales were
$1,649,251,000, up 9%
from $1,512,889,000.
In the fourth quarter of fiscal 2007, Flowers Bakeries EBIT was
$33,783,000, up 31% from
$25,712,000. Sales were
$388,375,000, up 11%.
Commenting in a Jan.
31 conference call with
analysts, Mr. Deese said
sales of branded products
continued to grow, taking
on a higher percentage of
Flowers total sales.
"That indicates that consumers are not trading down," Mr. Deese
said. "It also demonstrates the power
of our Nature's Own, Whitewheat and
other brands. Many of today's consumers want the healthier varieties, the flavor choices, and the assured quality that
our branded products offer."
The power of Nature's Own was evident in the brand's double-digit sales
growth for the fourth quarter and
year, Mr. Deese said. He specifically
mentioned the brand's all-natural premium bread line, whose success was
"well ahead of the category."
Flowers Specialty Group EBIT in the
full year was $26,419,000, up 42% from
$18,544,000. Sales were $387,423,000,
up 3%.
In the fourth quarter, Flowers Specialty Group EBIT was $5,382,000, down 5%

Kellogg reports 2007 earnings up 10%,
affirms 2008 sales profit guidance
BATTLE CREEK, MICH. - Kellogg Co.
reported net earnings for fiscal 2007
of $1,103 million, up 10% from $1,004
million a year earlier, although fourthquarter earnings slipped 3% from the
same period a year ago.
Net earnings per share for fiscal 2007
were $2.76 compared with $2.51 in fiscal 2006 and represented the sixth consecutive year that Kellogg has met or
12 / February 12, 2008

Milling & Baking News

exceeded its long-term e.p.s. targets,
the company said. Net sales for the year
ended Dec. 29 were $11,776 million, up
8% from $10,907 million in 2006.
David Mackay, president and chief
executive officer, said the company
posted strong results despite significant additional cost pressures.
"We achieved these results by sticking to our business model and focusing

from $5,676,000 in the same period last
year. Sales were $85,289,000, down 3%.
The success in the bread category
was not mirrored by the company's
snack cakes business, which suffered
lower sales in the quarter and year.
"We continue to shift our focus on
branded snack cakes and exit contract production," Mr. Deese
said. "And we had
less promotion activity in the fourth quarter as we continued to
strengthen our margins.
In October, we introduced several 100-calorie Blue Bird and Mrs.
Freshley's snack cakes.
We are pleased with the
consumer acceptance of
these 100-calorie snacks."
Flowers invested $88.1
million in capital expenditure projects during the year, including
new production capacity
in Newton, N.C. The projects
also included the purchase of a
building in Suwanee, Ga., which
had been leased since the company's
divestiture of Mrs. Smith's in 2003.
During the fourth quarter, Flowers
purchased a small bakery mix operation in Maryland.
Flowers updated its guidance for
fiscal 2008 and now said it expects
sales to be $2.210 billion to $2.258 billion, an increase of 8.5% to 11%. Net
income from continuing operations is
expected to be 4.5% to 4.8% of sales, or
$99.5 million to $108.4 million. Earnings per share from continuing operations is expected to be $1.07 to $1.17,
Flowers said. The company expects
capital spending to be $95 million to
$100 million, an amount that includes
costs for construction of new production capacity as well as maintaining
and improving efficiencies in the company's 36 existing bakeries. MBN

on sustainable performance, despite
absorbing very high levels of commodity, fuel, energy and benefit inflation,"
Mr. Mackay said.
For 2008, the company is anticipating
mid single-digit revenue and operating
profit growth as the result of business
momentum, price increases and efficiency in upfront investment initiatives.
Specifically, the company said it expects
2008 earnings will range from $2.92 to
$2.97 per share. The projection includes
commodity and energy cost inflation at
"unprecedented" levels and continued
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Milling & Baking News - February 12, 2008

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