THOMASVILLE, Ga., Nov. 12, 2014 /PRNewswire/ -- Flowers Foods, Inc. (NYSE: FLO), the nation's second-largest producer and marketer of fresh packaged bakery foods, today reported results for its 12-week third quarter ended October 4, 2014.
Third Quarter 2014 Results
For the 12-week third quarter of 2014, sales decreased 3.3% to $849.4 million. In last year's third quarter, sales were $878.5 million. This decrease was attributable to positive net price/mix of 1.1% and decreased volume of 4.4%. The positive net price/mix was due primarily to a favorable mix shift from cake and store branded products to branded bread and rolls, partially offset by a competitive pricing environment. Overall volume declines were driven primarily by decreases in the cake business, store-branded bread and rolls, and foodservice products.
Adjusted net income for the quarter was $44.4 million, or $0.21 per diluted share, compared to last year's third quarter adjusted net income of $38.4 million, or $0.18 per diluted share.
Gross margin (excluding depreciation and amortization) as a percent of sales was 47.8%, up 110 basis points compared to 46.7% in last year's third quarter. Increased manufacturing efficiencies, reduced outside purchases, and lower input prices all contributed to the improved gross margin.
For the quarter, selling, distribution, and administrative (SD&A) costs as a percent of sales were 36.1%. Excluding acquisition-related costs of $7.0 million in the third quarter last year, prior year SD&A was 36.5% of sales. Workforce-related cost decreases were offset by increased distributor delivery fees and costs associated with new market expansion. Reduced marketing expenditures also contributed to the reduced SD&A expenses as a percent of sales, primarily due to increased marketing spend in the prior year to support the reintroduction of the acquired Hostess brands.
Depreciation and amortization expenses as a percent of sales for the quarter remained relatively stable compared to last year's third quarter. Net interest expense decreased for the quarter compared to last year's third quarter primarily due to increased interest income associated with an increase in outstanding distributor notes receivable and lower outstanding debt obligations as compared to the prior year quarter. The effective tax rate for the quarter was 35.3% compared to 32.4% in last year's third quarter. This increase is due to discrete tax benefits recorded in the prior year quarter.
Adjusted EBIT was $69.4 million, or 8.2% of sales, compared to last year's third quarter of $60.3 million, or 6.9% of sales. During the third quarter of this year, carrying costs of $3.6 million related to the acquired Hostess facilities negatively affected adjusted EBIT margin by 40 basis points as a percent of sales. In the third quarter of last year, carrying costs of $5.3 million for the Hostess facilities negatively affected adjusted EBIT margin by 60 basis points as a percent of sales.
Adjusted EBITDA was $98.9 million, or 11.6% of sales, compared to last year's third quarter of $90.2 million, or 10.3% of sales. During the third quarter of this year, carrying costs of $1.6 million related to the acquired Hostess facilities negatively affected adjusted EBITDA margin by 20 basis points as a percent of sales. In the third quarter of last year, carrying costs of $2.8 million for the Hostess facilities negatively affected adjusted EBITDA margin by 30 basis points as a percent of sales. Full report.
