Milling & Baking News - May 21, 2019 - 14

Financial Results

Flowers sales trends solid, but
profit margin pressures persist
THOMASVILLE, GA. - Adjusted
earnings at Flowers Foods, Inc. edged
upward in the first quarter ended
April 20, boosted by record sales, but
commodity and labor cost headwinds
pressured profit margins.
Flowers Foods' net income in the
first quarter was $65,866,000, equal to
31c per share on the common stock,
up 29% from $51,247,000, or 24c, in the
same period a year earlier. Net sales
were $1,263,895,000, up 4.8% from
$1,206,453,000 in the first quarter of 2018.
Adjusted for special items, earnings per share rose 7%, to 32c. Special
charges in the 2018 quarter included
$541,000 more in restructuring and related impairment charges than in 2019,
$2,483,000 in impairment of assets
charges and $2,322,000 in multi-employer pension plan withdrawal costs.
Excluding the contributions of Canyon Bakehouse, acquired in 2018,

first-quarter sales were up 3% from
2018.
"We achieved record sales in the
first quarter and are proud of the solid
start to the year," said Allen L. Shiver,
president and chief executive officer.
"In our core business, we benefited
from pricing actions taken to mitigate
inflationary headwinds as well as continued growth from key brands, including Dave's Killer Bread, Nature's
Own and Wonder. The recently acquired Canyon Bakehouse also drove
top-line growth, and we remain ontrack with the roll-out of the brand
across our distribution network.
"While we are pleased with the results
of our growth initiatives and pricing actions to date, inflationary headwinds
from commodities, labor and transportation continue to pressure margins.
Therefore, in addition to improving
price realizations, the team is focused

on our supply chain optimization initiatives, which are intended to drive productivity and reduce fixed costs."
With the earnings announcement
and conference call with financial analysts, Mr. Shiver turned over the reins
to his successor A. Ryals McMullian.
"As announced in February, after 41
years with the company, I will be retiring next week, and Ryals McMullian
will become Flowers' next c.e.o.," he
said. "Flowers has never been better
positioned for growth and continued
success. It has been a privilege to lead
this company and work alongside the
best team in the industry. I am confident in Ryals and the entire Flowers
team, and I know they will continue to
execute on our strategic priorities and
build shareholder value."
In the May 16 call with investment
analysts, Mr. Shiver described the
company's top-line results as especially encouraging. While base business
volumes fell slightly, he noted that the
fresh bread category overall saw volumes dip 3% in the quarter with dollar

McMullian describes mindset shift at Flowers
THOMASVILLE, GA. - "There has been a clear shift of the collective
mindset of Flowers," said A. Ryals McMullian, who next week will
become chief executive officer of Flowers Foods, Inc.
In a call with investment analysts, Mr. McMullian briefly offered his
perspectives on progress Flowers has made in recent years and where
the company is headed.
He said the company has shifted "from one that was really more
operationally and technically focused to one that's now deeply strategic, forward-looking and accountable for executing with excellence."
He continued, "It's truly exciting and very satisfying to be a part
of this shift and to see it start to generate meaningful results."
Mr. McMullian will succeed Allen L. Shiver as c.e.o. During
the call, Mr. Shiver expressed pride over a 40-plus-year career
at the company and changes achieved during his tenure at
its helm.
"Over the past four decades, I've come to deeply appreciate the talent and the dedication of the Flowers team, and it McMullian
has been a great honor to work with them," he said. "Our
team has grown this company from a regional baker to a
national powerhouse with leading brands, strong customer
relationships and a valuable partnership with our independent distributors. I believe Flowers has never been in a better
position for the future.
"Since launching Project Centennial in 2017, our company
has restructured into a more brand- and consumer-focused Shiver
organization, and we continue to take actions to improve
efficiencies and enhance profitability. With our transformation well
underway and solid momentum in our business, it's the right time for
this leadership transition.
"Ryals and I have worked closely together for many years, and
I know that I'm leaving the company in very capable hands. Ryals
has been a driving force behind the efforts to extend the company
in the growing segments within our category. As chief operating
officer, he has done an outstanding job aligning the team behind
our strategic goals and in driving operational improvements. Ryals
14 / May 21, 2019

Milling & Baking News

has been working closely with me to prepare for this transition. I'm
confident he is the right choice to take the helm at this exciting and
important time in our company's history."
For his part, Mr. McMullian tipped his cap to Mr. Shiver for his years
of service and for showing the fortitude necessary to launch and execute Project Centennial, Flowers' multi-year restructuring initiative.
"I just want to say that I am deeply honored to accept this new
responsibility," he said. "I want to thank the board of directors, our
team and our customers for their support during this transition, which
takes place next week.
"But in particular, I want to thank Allen. I want to thank
him for having the courage to set us on the course we find
ourselves on today. It took a lot of conviction to embark on
what ultimately became Project Centennial and to up the
long-standing notions of what success looks like in our company and in our industry. He's created a really solid foundation
for us to build on, and for that, we are in a debt of gratitude.
"The transformation underway here at Flowers is a major
undertaking, but it's also absolutely necessary if we're going
to compete effectively in a complex 21st century marketplace.
Good progress has been made over the last two years. Our savings initiatives and our org restructuring have generated cost
savings that, along with improved price realization, have helped
us to offset some of the inflationary pressures we've seen more
recently. But these things also enabled us to make brand investments to drive above-category growth and increase our market
share, actually achieving record market share this quarter.
"And our realigned organization has clarified accountability and
driven our team to be hyper focused on building powerful brands,
connecting meaningfully with our consumers and improving our
profitability. And we're gaining new insights from enhanced analytical capabilities that help to provide heightened transparency in our
business but also inform better strategic decision-making. So across
the company and across functions, we're taking fresh approaches to
solving business challenges." MBN
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Milling & Baking News - May 21, 2019

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