Flowers Foods (FLO) Q4 2009 earnings summary

Executive summary

• FY2009 sales rose 7.7% to $2.601B; excluding the prior-year 53rd week, sales growth was 9.7%. Net income attributable to Flowers Foods increased 9.3% to $130.3M; diluted EPS was $1.41 vs. $1.28.

• Branded sales grew 7.9% on a 52-week-to-52-week basis despite a weak economy, competitive pressure and higher promotional activity.

• Growth priorities include deeper penetration of core markets, geographic expansion through DSD, product innovation and acquisitions; investments target efficient bakeries, stronger brands and distribution capabilities.

Financial highlights

• Sales were $2,600.8M vs. $2,414.9M, up 7.7%; the comparison includes 52 weeks in FY2009 and 53 weeks in FY2008.

• Net income attributable to Flowers Foods was $130.3M vs. $119.2M; diluted EPS was $1.41 vs. $1.28.

• Operating income rose to $206.3M from $182.7M; income before tax was $207.8M vs. $190.1M.

• Operating cash flow was $236.0M; cash and cash equivalents ended FY2009 at $18.9M.

• Reported sales growth contributions: acquisitions +7.3 percentage points, pricing/mix +2.6 points, volume -0.2 points and absence of the prior-year extra week -2.0 points.

Outlook and guidance

• Sales were expected to continue growing, but the level remained uncertain given the economic environment and competitive conditions.

• FY2010 capital expenditures were estimated at $85M-$95M, versus $72.1M in FY2009.

• A second production line at the Bardstown bakery was expected to begin production in spring 2010.

• Expected FY2010 pension contribution was $0.8M; pension cost was estimated at $0.6M.