Flowers Foods, Inc. reported results for its 12-week second quarter ended July 13, 2013. Sales increased 31.8 percent to $898.2 million. Diluted earnings per share (EPS), excluding acquisition-related costs, was $0.24, up 71.4 percent from last year’s second quarter. Including the acquisition-related costs of $0.02 per diluted share, diluted EPS was $0.22.
During the quarter, the company's board of directors declared a three-for-two split of the company's stock, effective June 19, 2013. All share information included in this release and the accompanying financial schedules reflect the stock split.
Volume increased 21.8 percent, acquisitions contributed 10.9 percent, and net price/mix was unfavorable 0.9 percent, driven by a change in product mix. The gross margin was 47.5 percent, compared to 46.3 percent for the second quarter of fiscal 2012. The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) margin, excluding the acquisition-related costs, was 11.8 percent for the quarter. Operating margin (EBIT), excluding the acquisition-related costs, was 9.0 percent. It generated $88.8 million in cash flow from operations.
The company completed roll out of the Sara Lee and Earthgrains brands for sliced breads, buns and rolls in the state of California as a result of the February 2013 acquisition of rights to these brands in California from BBU, Inc. It also completed the acquisition of 20 bakeries; the Wonder, Merita, Home Pride, Butternut, and Nature's Pride brands; and 36 depots from Hostess Brands for $355.0 million. This occurred subsequent to the end of the second quarter on July 19, 2013;
The offered 2013 guidance is for sales of $3.793 billion to $3.824 billion, an increase of 24.5 percent to 25.5 percent, and earnings per share of $0.92 to $0.98, excluding acquisitions-related costs, an increase of 34.2 percent to 43.0 percent.
Commenting on second quarter results, President and CEO Allen Shiver said, in a prepared statement, “Our team’s extraordinary efforts to serve customers’ needs resulted in another record quarter for Flowers Foods. Similar to the results reported last quarter, sales were up across all channels and earnings were strong. Margins improved due to higher volume and capacity utilization. It is gratifying that our long-term investments in our bakeries, distribution systems, and our team positioned us to take advantage of growth opportunities available in the marketplace. Our confidence in the current year and long-term outlook is reflected in our guidance.
“The integration of our recent acquisitions—Lepage Bakeries in New England and Sara Lee in California—remains on pace. Both of these businesses have significant growth potential as Nature’s Own, Tastykake, and other Flowers brands gain more acceptance in these markets.
“We are pleased with the July 2013 acquisition of certain bread assets from Hostess Brands. Our plans to re-introduce these well-known brands across our direct-store-delivery (DSD) markets later this year are taking shape. We expect to continue our methodical market expansion into new regions of the country, using the new brands along with legacy Flowers brands, such as Nature’s Own,” Shiver added.