THOMASVILLE, Ga., Sept. 27, 2017 /PRNewswire/ -- Flowers
Foods, Inc. (NYSE: FLO), producer of Nature's Own,
Wonder, Tastykake, Dave's Killer Bread, and
other bakery foods, today hosted an investor briefing at the New
York Stock Exchange during which it outlined its competitive
advantages and strategies for future value creation. Flowers also
provided an update on its operations, Project Centennial
initiatives, and financial outlook.
"Flowers is well underway to transforming and thriving in the
changing retail and consumer environment. Our vision is to be
America's premier baker, and our priorities are to aggressively
reduce costs, invest in core brands, and capitalize on strategic
growth opportunities," commented Allen
Shiver, Flowers Foods president and chief executive officer.
"Flowers is well positioned in a large category that is relevant to
consumers and profitable for retailers. We have built competitive
advantages that provide a strong platform for continued
growth. That said, the category is evolving and we intend to
evolve right along with it. With Project Centennial, we are focused
on driving growth in our core business, capitalizing on
adjacencies, reducing costs, and making strategic investments to
improve margins and profitably grow the top-line over
time."
Shiver concluded, "We are working with urgency to execute on our
strategic priorities and are confident we are taking the right
actions to create long-term value for our shareholders."
Executing on Project Centennial
The company is on track to achieve cost savings associated with
Project Centennial, a comprehensive, company-wide program to
streamline operations, drive efficiencies, and to invest in
strategic capabilities. At today's investor briefing, Flowers
provided an update on initiatives underway within each of Project
Centennial's key priorities:
- Reinvigorate the Core
-
- Investing in brands: The company expects to make
incremental investments in 2018 to align its brands with today's
consumer preferences and will leverage scale and cash flows of
established brands to support growth of high-potential brands.
- Simplifying portfolio: The company is improving
manufacturing efficiencies and reducing SKUs.
- Enabling partners: The company is improving business
intelligence and execution support for its independent distributor
partners.
- Capitalize on Adjacencies
-
- The company is expanding its position in high-growth categories
and growing share in underdeveloped segments and geographies. It is
also developing new ways to create value through its disciplined
M&A strategy.
- Generate Fuel for Growth
-
- The company is executing on key savings initiatives in its
purchased goods and services program (PG&S) and by improving
productivity through supply chain optimization (SCO).
- Develop Leading Capabilities
-
- Flowers is investing to upgrade technology and enhancing its
financial planning and analysis (FP&A) function and
transitioning to a new organizational structure, which is expected
to be completed in fiscal 2018. The reorganization is designed to
enhance individual accountability and operational efficiency, and
emphasize brand growth and innovation in line with a national
branded food company.
Financial Performance and Outlook
During the briefing,
the company discussed its 2017 outlook with sales flat to down 1%,
EPS in the range of $0.67 to $0.69
and adjusted EPS in the range of $0.85 to
$0.90.1
The company also detailed gross savings targets relative to
fiscal 2016 of $25 million to $30
million for fiscal 2017 and of $70
million to $80 million for fiscal 2018 from PG&S, SCO,
and other cost saving initiatives. The company also outlined
meaningful incremental brand investments in fiscal 2018, as well as
anticipated input cost inflation in the range of $30 million to $40 million for 2018.
Additionally, the company maintains its previously communicated
EBITDA margin goal for fiscal 2018 of 12% to 13%.
Flowers' long-term organic growth goal is to outperform its
categories by supporting the company's high-potential brands with
innovation and marketing, while improving execution in the
marketplace. In addition to organic growth, the company will
continue to look at accretive acquisitions. The company is
targeting long-term sales growth of 3% to 4%. Flowers remains
confident in its target of realizing 250bps of EBITDA margin
expansion by fiscal 2021, and expects EPS growth over the long-term
in the range of 8% to 10%.
"Flowers is positioned to deliver top-tier returns to
shareholders over the long-term," said Steve Kinsey, chief
financial officer and chief administrative officer. "Today, we are
executing on a number of sound strategic priorities designed to
strengthen our competitive advantages through brand growth and
improving operational efficiency."
1 See non-GAAP reconciliation at the end of the press
release.
Anticipated Third Quarter Matters Affecting
Comparability
In the third quarter of fiscal 2017, the
company expects the following items to impact comparability.
|
Estimated
|
|
Impact to
Operating Income
|
|
Q3
2017
|
|
Q3 2017
YTD
|
|
(amounts in
millions)
|
Gain on
divestiture
|
$
-
|
to
|
$
-
|
|
$ (28.9)
|
to
|
$
(28.9)
|
Project Centennial
consulting costs
|
7.3
|
|
7.5
|
|
32.1
|
|
32.3
|
Legal
settlement
|
4.0
|
|
4.3
|
|
4.3
|
|
4.6
|
Voluntary separation incentive
program (VSIP)
|
27.0
|
|
30.0
|
|
27.0
|
|
30.0
|
Multi-employer
pension withdrawal
|
18.0
|
|
18.5
|
|
18.0
|
|
18.5
|
Lease termination
costs
|
-
|
|
-
|
|
0.6
|
|
0.6
|
Winston-Salem asset
impairment and closing costs (excluding amounts in VSIP)
|
4.5
|
|
5.0
|
|
4.5
|
|
5.0
|
Total
|
$60.8
|
to
|
$65.3
|
|
$
57.6
|
to
|
$
62.1
|
|
|
|
|
|
|
|
|
In addition, the company anticipates non-cash charges related to
pension settlement charges and trademark impairments from the brand
rationalization project to be recorded in Q3 2017; however, the
company cannot estimate these amounts at this
time.
Investor Briefing Replay and Presentation
Information
The Investor Briefing webcast and podcast replay
and presentation will be archived at www.flowersfoods.com. To
access, click on Investor Center, select "Events and Webcasts", and
then select "Archived Webcasts." Replay will be available
approximately two hours after the event.
About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (NYSE:
FLO) is one of the largest producers of fresh packaged bakery foods
in the United States with 2016
sales of $3.9 billion. Flowers
operates bakeries across the country that produce a wide range of
bakery products. Among the company's top brands are Nature's
Own, Wonder, Tastykake, and Dave's Killer
Bread. Learn more at www.flowersfoods.com.
Forward-Looking Statements
Statements contained in
this press release that are not historical facts are
forward-looking statements. Forward-looking statements relate to
current expectations regarding our future financial condition,
performance and results of operations, planned capital
expenditures, long-term objectives of management, supply and
demand, pricing trends and market forces, and integration plans and
expected benefits of transactions and are often identified by the
use of words and phrases such as "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intend," "may," "plan,"
"predict," "project," "should," "will," "would," "is likely to,"
"is expected to" or "will continue," or the negative of these terms
or other comparable terminology. All forward-looking statements are
subject to risks and uncertainties that could cause actual results
to differ from those projected. Other factors that may cause actual
results to differ from the forward-looking statements contained in
this release and that may affect the company's prospects in general
include, but are not limited to (a) competitive conditions in the
baked foods industry, including promotional and price competition,
(b) changes in consumer demand for our products, including changes
in consumer behavior, trends and preferences, including health and
whole grain trends, and the movement toward more inexpensive
store-branded products, (c) the success of productivity
improvements and new product introductions, (d) a significant
reduction in business with any of our major customers including a
reduction from adverse developments in any of our customer's
business, (e) fluctuations in commodity pricing, (f) energy and raw
material costs and availability and hedging and counterparty risk,
(g) our ability to fully integrate recent acquisitions into our
business, (h) our ability to achieve cash flow from capital
expenditures and acquisitions and the availability of new
acquisitions that build shareholder value; (i) our ability to
successfully implement our business strategies, including those
strategies the company has initiated under Project Centennial,
which may involve, among other things, the integration of recent
acquisitions or the acquisition or disposition of assets at
presently targeted values, the deployment of new systems and
technology and an enhanced organizational structure, (j)
consolidation within the baking industry and related industries;
(k) disruptions in our direct-store delivery system, including
litigation or an adverse ruling from a court or regulatory or
government body that could affect the independent contractor
classification of our independent distributors; (l) any
existing or additional disruptions to the business due to weather
or other circumstances, including government regulation or
restrictions resulting therefrom; (m) increasing legal complexity
and legal proceedings that we are or may become subject to; and (n)
the failure of our information technology systems to perform
adequately, including any interruptions, intrusions or security
breaches of such systems. The foregoing list of important factors
does not include all such factors, nor necessarily present them in
order of importance. In addition, you should consult other public
disclosures made by the company, including the risk factors
included in our most recently filed Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q filed with the Securities and
Exchange Commission ("SEC") and disclosures made in other filings
with the SEC and company press releases, for other factors that may
cause actual results to differ materially from those projected by
the company. We caution you not to place undue reliance on
forward-looking statements, as they speak only as of the date made
and are inherently uncertain. The company undertakes no obligation
to publicly revise or update such statements, except as required by
law.
Information Regarding Non-GAAP Financial Measures
The
company prepares its consolidated financial statements in
accordance with U.S. Generally Accepted Accounting Principles
(GAAP). However, from time to time, the company may present in its
public statements, press releases and SEC filings, non-GAAP
financial measures such as, EBITDA, adjusted EBITDA, adjusted EBIT,
EBITDA margin, adjusted EBITDA margin, adjusted net income,
adjusted EBIT by segment, and adjusted EPS, adjusted selling,
distribution and administrative expenses (SD&A), gross margin
excluding depreciation and amortization and the ratio of net debt
to adjusted EBITDA. The reconciliations attached provide
reconciliations of the non-GAAP measures used in this presentation
or release to the most comparable GAAP financial measure. The
company's definitions of these non-GAAP measures may differ from
similarly titled measures used by others. These non-GAAP measures
should be considered supplemental to, and not a substitute for,
financial information prepared in accordance with GAAP.
The company defines EBITDA as earnings from continuing
operations before interest, income taxes, depreciation,
amortization and income attributable to non-controlling interest.
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. EBITDA is used as the primary performance measure in the
company's 2014 Omnibus Equity and Incentive Compensation Plan.
Furthermore, pursuant to the terms of our credit facility, EBITDA
is used to determine the company's compliance with certain
financial covenants. 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 EBIT, adjusted net
income, adjusted EBIT by segment, and adjusted net income per
diluted share, respectively, excluding the impact of asset
impairment charges, acquisition-related costs, and pension plan
settlements. 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.
Net debt to EBITDA is used as a measure of financial leverage
employed by the company. Gross margin excluding depreciation and
amortization is used as a performance measure to provide additional
transparent information regarding our results of operations on a
consolidated and segment basis. Changes in depreciation and
amortization are separately discussed and include depreciation and
amortization for materials, supplies, labor and other production
costs and operating activities.
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 reconciliation below provides a reconciliation of
the non-GAAP measure used in this release to the most comparable
GAAP financial measure.
Reconciliation of Non-GAAP Financial Measure:
|
Reconciliation of
Earnings per Share
|
|
Full Year Fiscal 2017
Guidance
|
|
Range
Estimate
|
|
|
|
|
Net income per
diluted common share
|
$
0.67
|
to
|
$
0.69
|
Gain on sale of
Specialty Blending
|
(0.09)
|
|
(0.09)
|
Project Centennial
consulting costs
|
0.11
|
|
0.12
|
VSIP
|
0.08
|
|
0.09
|
Multi-employer
pension withdrawal
|
0.05
|
|
0.06
|
Legal
settlement
|
0.01
|
|
0.01
|
Plant closure and
lease termination costs
|
0.02
|
|
0.02
|
Adjusted net income
per diluted common share
|
$
0.85
|
to
|
$
0.90
|
|
|
|
|
Additionally, we
anticipate non-cash charges related to trademark impairments and
pension settlement losses to be recorded in Q3 2017; however, we
cannot estimate these amounts at this time.
|
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SOURCE Flowers Foods, Inc.