Flowers Foods (FLO) Q4 2007 earnings summary

Executive summary

• FY 2007 sales rose 7.8% to $2.04B; net income increased 16.7% to $94.6M, and diluted EPS rose 15.9% to $1.02.

• EBITDA from continuing operations reached $210.8M, or 10.3% of sales, achieving the long-term 10%–12% target range for the first time.

• Results were achieved amid more than $100M of input-cost increases, with pricing and operational efficiencies helping offset cost pressure.

Financial highlights

• Sales were $2,036.7M versus $1,888.7M in FY 2006; the 7.8% increase reflected 5.6% pricing and 2.2% favorable mix and volume.

• Income from continuing operations before the cumulative accounting change rose 26.4% to $94.6M; diluted continuing-operations EPS increased 25.9% to $1.02.

• Operating income increased to $144.7M from $118.5M; income from continuing operations before tax, minority interest and accounting change was $153.1M versus $123.4M.

• Gross margin was 49.0% of sales versus 49.7%; selling, marketing and administrative expenses declined to 38.7% from 40.2% of sales.

• Branded retail sales grew 8.8%; cash dividends per share increased 44.5% to $0.458.

Outlook and guidance

• FY 2008 outlook called for solid results in line with long-term goals, despite record-high commodity costs and significantly higher expected input costs.

• Planned FY 2008 capital expenditures were $95M–$100M, including approximately $19M for the Bardstown bakery.

• FY 2008 was scheduled as a 53-week fiscal year; the Bardstown bakery was expected to begin production with one line in fall 2008.

• Long-term EBITDA target remained 10%–12% of sales; FY 2007 reached 10.3%.