Reflecting major restructuring and related impairment charges, Flowers Foods, Inc. sustained a loss of $33,571,000 in the third quarter ended Oct. 7. A year earlier, Flowers had third quarter net income of $40,216,000, equal to 19c per share on the common stock. Sales in the third quarter were $932,822,000, up 1.5% from $918,791,000.
The largest component of the quarterly loss was $100,549,000 in restructuring and related impairment charges. Other charges in the quarter were $18,268,000 in multi-employer pension plans withdrawal costs and a $3,030,00 pension plan settlement loss. In addition, consulting costs for Project Centennial totaled $7.1 million, versus $1.2 million in consulting costs for the program in the third quarter of 2016.
Adjusted EBITDA in the third quarter was $112.4 million, up 9% from the same period a year earlier. Adjusted EBITDA margins widened by 80 basis points during the quarter, to 12% of sales.
“We are pleased with our results for the quarter, which reflect the strength of our brands, the dedication of our team and independent distributor partners, and the ongoing restructuring efforts under Project Centennial,” says Allen L. Shiver, president and chief executive officer. “Strong demand for Dave’s Killer Bread and outstanding execution and service in the marketplace drove growth in sales and market share during the quarter. Earnings were impacted by expected strategic charges that allow us to lower our cost structure and streamline our company, increase focus on our strongest brands, and improve our supply chain. Excluding these charges, our profitability in the third quarter was solid, driven by improved manufacturing efficiencies and enhanced cost discipline across the company. Through Project Centennial, we are making substantial progress and building momentum to achieve the underlying earnings potential of the business.”
Elaborating on the improved efficiencies, Flowers said the company:
• Is on track to achieve fiscal 2018 gross savings goal of $70 million to $80 million, versus 2016,
• is continuing a transition to its new organizational structure
• completed the voluntary separation incentive program.
Flowers said it conducted “lean” events at baking plants to pursue continuous improvement in operations, performed regional scenario analyses to better optimize the company’s manufacturing network, and moved forward with initiatives to reduce purchased goods and services spending.
Toward reinvigorating its core business, Flowers progressed in its stock-keeping unit rationalization to “reduce merchandising complexity and improve manufacturing efficiencies.” Utilization of a third-party distribution platform to expand distribution of products in the Upper Midwest also was a plus, the company said.
“Our strategic objectives are on track, and the progress we are making is encouraging,” Shiver says. “We are capturing savings through organizational efficiencies and reduced spending on purchased goods and services. Our focus on productivity and continuous improvement is delivering improved efficiencies. We are streamlining our product assortment, reducing complexity in the marketplace and in our bakeries. With our increased focus on innovation and product differentiation, our team is developing a robust innovation pipeline to drive brand growth. I am confident the changes we are making will build shareholder value over the long term.”
In the 40 weeks ended Oct. 7, Flowers net income was $71,587,000, or 34c per share, down 53% from $150,734,000, or 72c, in the same period in 2016. Sales were $3,047,110,000, down less than 1% from $3,058,168,000.