Flowers Foods has a market cap of $2.65 billion; its shares were traded at around $19.3 with a P/E ratio of 20.2 and P/S ratio of 1. The dividend yield of Flowers Foods stocks is 3.1%. Flowers Foods had an annual average earning growth of 12.8% over the past 10 years. GuruFocus rated Flowers Foods the business predictability rank of 5-star.
Highlight of Business Operations:Acquisitions. On May 20, 2011, a wholly owned subsidiary of the company acquired Tasty. Tasty operates two bakeries in Pennsylvania and serves customers primarily in the northeastern United States under the Tastykake snack brand. The results of Tastys operations are included in the companys consolidated financial statements as of May 20, 2011 and are included in the companys DSD segment. The acquisition facilitated our expansion into new geographic markets and increased our manufacturing capacity. In addition, the Tastykake brand increased our position in the branded snack cake category. During 2011, Tasty contributed sales of $127.2 million and income from operations of $3.0 million. Tasty is included in our DSD segment primarily because of the delivery method for Tastykake products. The DSD model will allow us to expand the Tastykake brand and the Natures Own brand throughout our respective networks.
Income Taxes. The effective tax rate for fiscal 2010 and fiscal 2009 was 34.9% and 35.6%, respectively. This decrease is primarily due to the increase in Section 199 qualifying production activities deduction and favorable discrete items recognized during the year, partially offset by the absence of non-taxable earnings from the previously consolidated VIE. The difference in the effective rate and the statutory rate is primarily due to state income taxes and the Section 199 qualifying production activities deduction.
Distributor Arrangements. The company offers long-term financing to independent distributors for the purchase of their territories, and a vast majority of the independent distributors elect to use this financing alternative. The distributor notes generally have terms of up to ten years, and the distributors pay principal and interest weekly. A majority of the independent distributors have the right to require the company to repurchase the territories and trucks, if applicable, at the original price paid by the distributor on the long-term financing arrangement in the six-month period following the sale of a territory to the independent distributor. If the truck is leased, the company will assume the lease payment if the territory is repurchased during the first six-month period. If the company had been required to repurchase these territories, the company would have been obligated to pay $0.8 million and $0.8 million as of December 31, 2011 and January 1, 2011, respectively. After the six-month period expires, the company retains a right of first refusal to repurchase these territories. Additionally, in the event the company exits a territory or ceases to utilize the independent distribution form of doing business, the company is contractually required to purchase the territory from the independent distributor for ten times average weekly branded sales. If the company acquires a territory from an independent distributor that is to be resold, the company operates the territory until it can be resold. If the territory is not to be resold, the value of the territory is charged to earnings. The company held an aggregate of $117.1 million and $105.4 million as of December 31, 2011 and January 1, 2011, respectively, of distributor notes. The company does not view this aggregate amount as a concentrated credit risk, as each note relates to an individual distributor. The company has
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