Flowers Foods (FLO, Financial), headquartered in Thomasville, Ga., is one of the largest producers of packaged bakery foods in the U.S. The company operates more than 40 highly efficient bakeries that produce a wide range of bakery food for retail and foodservice customers in the U.S. It is a dynamic company that has been delivering quality baked foods at a good value for about 95 years.
Flowers Foods' top DSD (direct-store-delivery) brand is Nature's Own, the #1-selling bread brand in the U.S. Other top brands include Whitewheat, Wonder, Cobblestone Bread Co., and Tastykake. In fiscal year 2014, Flowers Foods had sales of $3.7 billion.
The company posted strong third quarter results and the dividend looks attractive. Flowers Foods is a strong player and investors should consider adding this company to their portfolio. It is known for rewarding its investors with decent dividends, and is continuously expanding through acquisitions.
Strong third quarter:
- Sales increased by 4.8% during the quarter and were $885 million.
- Adjusted EBITDA increased by 6.1% and was $105 million.
- Adjusted net income increased by 8.3% and was $48 million.
- Adjusted net income per diluted common share increased by 9.5% and was 23 cents.
- Sales in expansion markets contributed 1.2% to the overall sales increase during the quarter, driven by the acquired Hostess bread brands and entrance into new markets. Flowers now reaches 83% of the U.S. population through direct-store delivery (DSD) distribution.
- The company generated $64.6 million of cash flow from operations during the third quarter.
- During the quarter, cash flow from operating activities was $64.6 million.
- Capex was $20.7 million.
Dividend
The company declared a third quarter dividend of 14.5 cents per share, an increase of 9.4% over the same quarter last year. This is the 53rd consecutive quarterly dividend paid by the company and is payable on Dec. 18 to shareholders of record on Dec. 4.
Updated fiscal 2015 outlook
The company expects the following:
- 52-week fiscal 2015 sales to be around $3.818 billion to $3.842 billion.
- Adjusted net income per diluted common share of 96 to 98 cents.
- Acquisitions are anticipated to contribute approximately $50 million to $55 million to fiscal 2015 sales and be neutral to net income per diluted common share.
- Capex to be around $85 million to $95 million.
Acquisition
On Oct. 13, the company completed the acquisition of Alpine Valley Bread Company, a family-owned, U.S. producer of certified organic and all natural breads, for $120 million in cash and stock. Alpine Valley Bread Company will operate as an independent subsidiary of Flowers Foods.
"Alpine Valley has a great team, delicious products, and a proven warehouse distribution platform in place to support the strong growth of their organic brands," said Allen L. Shiver, Flowers Foods' president and CEO. "We're looking forward to continuing that growth with this significant addition to our organic business."
On Sept. 14, the company announced it has completed the acquisition of Dave's Killer Bread, the nation's best-selling organic bread, for approximately $275 million in cash. Dave's Killer Bread will operate as an independent subsidiary of Flowers Foods.
(Source: Company Website)
Strong attributes of third quarter
- Improved efficiencies.
- Cost reductions.
- Growing sales.
- Expansion.
Focus
- Margin improvement initiatives.
- Expanding portfolio through strategic partnerships.
- Product innovation.
- Focused on delivering shareholder value.
On a concluding note
The company maintains some of the most efficient and technologically advanced bakeries in the country and has a team of outstanding employees and associates. Each bakery operates as a separate subsidiary of the company and has its own president, human resources director, and controller. Fresh breads, buns, rolls, snack cakes, and tortillas are available to approximately 80% of the U.S. population through the company's direct-story delivery (DSD) network. This network covers the Northeast, South, southern Midwest, Southwest, and California.
Nature's Own is America's best-selling bread, offering a delicious selection of fresh breads and buns made from nature's best ingredients. Nature's Own items are available to approximately 79% of the U.S. population in 36 States and the District of Columbia.
It offers something for everyone - from breads that meet specific dietary needs to indulgent snack cakes and sweet pastries. It is quite adept at delivering exactly what a consumer wants. The acquisition strategy is going to pay well in the long run. It made great strides in integrating the new businesses over the past two years. Consumers expect innovation and the new products are key to driving growth. Flowers Foods is poised to grow.
Disclosure: I do not hold any position in the company.
