Flowers Foods profit climbs 17% in '07

by Eric Schroeder
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THOMASVILLE, GA. — Net income of Flowers Foods, Inc. in the year ended Dec. 29, 2007, was $94,615,000, equal to $1.02 per share on the common stock, up 17% from $81,043,000, or 88c per share in fiscal 2006. Net income for 2006 includes a gain from discontinued operations of $6.7 million, or 11c per share.

Sales were $2,036,674,000, up 8% from $1,888,654,000.

"We posted another year of strong sales and earnings growth," said George E. Deese, chairman, chief executive and president. "Although we faced significantly higher ingredient costs, our team worked to increase efficiencies and control our expenses to help offset those costs. Because of those efforts, our selling, marketing and administrative costs as a per cent of sales were lower, which helped us deliver improved earnings."

In the fourth quarter, Flowers posted income of $21,431,000 on sales of $473,664,000, up from $15,836,000 on sales of $438,178,000, respectively, in the same period a year ago.

The sales increase of 8% for fiscal 2007 reflects favorable pricing of 6%, favorable mix shifts of 2% and increased volume of 0.3%. The Bakeries Group experienced sales growth of 9% behind increased pricing of 6%, volume growth of 3%, and improved product mix of 0.3%.

The Specialty Group experienced 2007 fiscal sales growth of 3%. The growth was driven by favorable pricing of 4.5% and a favorable mix shift of 3%, which more than offset a 5% unit volume decrease. The volume decline primarily was due to the shift from single unit snack cakes to multi-pack snack cakes.

Flowers Bakeries Group earnings before interest and taxes in the year were $146,754,000, up 16% from $126,183,000 in fiscal 2006. Sales were $1,649,251,000, up 9% from $1,512,889,000.

In the fourth quarter of fiscal 2007, Flowers Bakeries EBIT was $33,783,000, up 31% from $25,712,000. Sales were $388,375,000, up 11%.

Flowers Specialty Group EBIT in the full year was $26,419,000, up 42% from $18,544,000. Sales were $387,423,000, up 3%.

In the fourth quarter, Flowers Specialty Group EBIT was $5,382,000, down 5% from $5,676,000 in the same period last year. Sales were $85,289,000, down 3%.

Flowers said its gross margin as a percentage of sales was 49% for the year, which compared with 49.7% in fiscal 2006.

For the year, selling, marketing and administrative costs as a percentage of sales were 38.7% compared with 40.2% in fiscal 2006.

Flowers invested $88.1 million in capital expenditure projects during the year, including new production capacity in Newton, N.C. The projects also included the purchase of a building in Suwanee, Ga., which had been leased since the company’s divestiture of Mrs. Smith’s in 2003. During the fourth quarter, Flowers purchased a small bakery mix operation in Maryland.

Flowers updated its guidance for fiscal 2008 and now said it expects sales to be $2.210 billion to $2.258 billion, an increase of 8.5% to 11%. Net income from continuing operations are expected to be 4.5% to 4.8% of sales, or $99.5 million to $108.4 million. Earnings per share from continuing operations are expected to be $1.07 to $1.17, Flowers said. The company expects capital spending to be $95 million to $100 million, an amount that includes costs for construction of new production capacity as well as maintaining and improving efficiencies in the company’s 36 existing bakeries.

In early morning trading on Jan. 31, Flowers stock traded at $23.09, up about 5% from the previous day's close of $21.89.

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