8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 6, 2008

FLOWERS FOODS, INC.

(Exact name of registrant as specified in its charter)

Georgia	1-16247	58-2582379
(State or other	(Commission	(IRS Employer
jurisdiction	File Number)	Identification No.)
of incorporation)

1919 Flowers Circle, Thomasville, GA	31757
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (229) 226-9110

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 

Item 2.02. Results of Operations and Financial Condition.

     On November 6, 2008, Flowers Foods, Inc. issued a press release (i) announcing its financial condition and results of operations as of and for the third quarter of fiscal 2008; (ii) updating its guidance for fiscal 2008 and (iii) offering preliminary guidance for fiscal 2009. A copy of the press release is furnished with this Report as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

Exhibit Number	Description
99.1	Press Release of Flowers Foods, Inc. dated November 6, 2008

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FLOWERS FOODS, INC.
By:	/s/ R. Steve Kinsey Name: R. Steve Kinsey
	Title: Executive Vice President and Chief
	Financial Officer

Date: November 6, 2008    

 

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of Flowers Foods, Inc. dated November 6, 2008

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EX-99.1

EXHIBIT 99.1

November 6, 2008 Company Press Release Flowers Foods (NYSE: FLO)

FLOWERS FOODS REPORTS THIRD QUARTER RESULTS;
UPDATES 2008 GUIDANCE AND PROVIDES PRELIMINARY 2009 GUIDANCE

THOMASVILLE, GA— Flowers Foods (NYSE: FLO) today reported results for its 12 and 40 weeks ended October 4, 2008. The company also updated its earnings guidance for 2008 and gave preliminary guidance for 2009.

Third Quarter 2008 Summary

• Sales in the quarter were $575.9 million, a 21.2% increase over the third quarter of 2007.

• Net income for the quarter was $27.4 million, or $.29 per diluted share, a 21.8% increase over the 2007 third quarter.

• Gross margin declined 50 basis points due to higher input costs, which were only partially offset by increased efficiencies and pricing.

• Selling, marketing and administrative costs improved 50 basis points as a percent of sales.

• EBITDA was $59.8 million, or 10.4% of sales.

• Branded retail sales were up 20.0% in the quarter, driven by Nature’s Own soft variety and premium breads, Nature’s Own Whitewheat breads, and regional white bread brands. Recent acquisitions contributed 3.8% of the branded retail sales increase.

• Guidance for fiscal 2008 was updated to sales of $2.420 billion to $2.430 billion and net income of $113.6 million to $117.3 million, or $1.22 per share to $1.26 per share with 93.1 million average shares outstanding.

• Preliminary guidance for fiscal 2009 anticipates a 12.2% to 14.0% sales increase and a 9.2% to 15.3% increase in net income.

“Sales across all categories remain strong, and we are on track to continue expanding our geographic footprint, deliver profitable growth, and drive product innovation,” said George E. Deese, Chairman of the Board, Chief Executive Officer, and President. “Our performance in the quarter again demonstrates the strength of our brands and our team’s ability to execute well in the marketplace.

“During the quarter, our team achieved a 3.0% improvement in manufacturing efficiencies. Unfortunately, the improvements and our pricing actions were not enough to offset our higher input costs, and, as a result, our gross margin declined. However, we achieved a 50-basis-point improvement in

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selling, marketing, and administrative costs partially through our strategy to move production closer to the market and reduce logistics costs. Those improvements offset our lower gross margin and allowed us to deliver good results for the quarter.”

Commenting on recent acquisitions, Deese said, “During the quarter, we made good progress integrating our newest acquisitions—Holsum Bakery and ButterKrust Bakery—into Flowers Foods. We are working to take advantage of synergies and growth opportunities related to these businesses.”

“Looking forward, the determination of our team, our continued focus on our growth strategies, and our continued improvements in efficiency and cost structure, give me confidence that we will meet our goals and deliver increased value for our shareholders over the long term,” he said.

Updated Guidance for Fiscal 2008

Taking into consideration the company’s performance year-to-date and the impact of recent acquisitions, the company now expects sales growth in 2008 of 18.8% to 19.3%. Therefore, sales for fiscal 2008 are expected to be $2.420 billion to $2.430 billion. Fiscal 2008 is a 53-week year and approximately 1.8% of estimated fiscal 2008 sales are expected from the 53rd week. The company expects net income will be 4.7% to 4.8% of sales or $113.6 million to $117.3 million. With approximately 93.1 million average shares outstanding, which reflects shares issued for the Holsum merger and share repurchase activity, earnings per share are expected to be $1.22 to $1.26, an increase of 19.6% to 23.5% over 2007. Previously, the company’s guidance for 2008 had been for sales of $2.400 billion to $2.425 billion, net income of $109.2 million to $114.7 million, and earnings per share of $1.17 to $1.23 on 93.4 million average shares outstanding.

Preliminary Guidance for Fiscal 2009

Offering preliminary guidance for 2009, Deese said the company expects sales growth of 12.2% to 14.0% in the year ahead, with recent acquisitions accounting for 7.0% to 7.5% of the increase. Therefore, sales for fiscal 2009 are expected to be $2.720 billion to $2.765 billion. The company’s fiscal year 2009 will be a 52-week year compared to 53 weeks in fiscal 2008. For 2009, net income is expected to be 4.6% to 4.9% of sales, or $124.1 million to $135.3 million. With approximately 93.3 million average shares outstanding, earnings per share are expected to be $1.33 to $1.45, an increase of 9.0% to 15.1% over the fiscal 2008 guidance. Capital spending in fiscal 2009 is expected to be $75.0 million to $85.0 million, an amount that includes costs for construction of new production capacity as well as maintaining and improving efficiencies in the company’s 39 existing bakeries.

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“Our team’s ability to deliver good results this year and our confidence in our preliminary guidance for 2009 are possible because of the underlying strengths of our company,” Deese said. “As 2009 brings continued volatility in commodities and economic uncertainty that could influence consumer buying trends, our plan is to continue working to be the most efficient and cost effective operator in our industry and to offer products and service that meet the needs of our customers and consumers.

“Our 2009 expectations are based on our ability to perform well in the marketplace, to maintain our volume, and to further improve our efficiencies and reduce our costs. We will continue to manage our business well and further implement the strategies that have created competitive advantages for us in the marketplace,” Deese said. “Doing so will help us maximize shareholder value over the long term and we remain focused on achieving that goal.”

Detailed Review of 3Q and Year-to-date

For the third quarter, sales increased 21.2% to $575.9 million over the $475.2 million reported for last year’s third quarter. Net income was $27.4 million, or $.29 per diluted share, a 21.8% increase over the $22.5 million, or $.24 per diluted share, reported for the 2007 third quarter. The quarter’s sales increase of 21.2% was achieved through a favorable pricing/mix of 10.9%, unit volume increase of 1.2%, and the two acquisitions contributed 9.1%. During the quarter, the company’s direct-store-delivery (DSD) sales grew 24.7% due to a favorable pricing/mix of 10.6%, unit volume increase of 2.9%, and 11.2% contributed by the two acquisitions. Sales through warehouse delivery increased 6.1%, reflecting positive pricing/mix of 8.9% and decreased unit volume of 2.8%.

Sales for the 40 weeks of 2008 increased 14.7% to $1.79 billion over the $1.56 billion reported for the 40 weeks of 2007. Net income was $87.1 million, or $.94 per diluted share, a 19.1% increase over the $73.2 million, or $.79 per diluted share, reported for the same period of 2007. The sales increase of 14.7% was achieved through a favorable pricing/mix of 10.4%, unit volume increase of 1.5%, and the two acquisitions contributed 2.8%. Year-to-date, the company’s DSD sales grew at 17.0% due to favorable pricing/mix of 11.0%, unit volume increase of 2.6%, and 3.4% from the acquisitions. Sales through warehouse delivery increased 5.2%, reflecting positive pricing/mix of 5.8% and a slight unit volume decrease of 0.6%.

For the quarter, gross margin as a percent of sales was 48.1% compared to 48.6% in the third quarter of 2007. The decrease in margin was due to higher commodity costs, primarily flour, in the quarter. Ingredient costs in the quarter, excluding the effect of the acquisitions, were up 21% over the prior year quarter. These cost increases were partially offset by sales gains, improved manufacturing efficiencies

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that resulted from strategic capital investments and better manufacturing controls, and lower labor costs as a percent of sales.

Gross margin year-to-date was 47.5% of sales compared to 49.1% year-to-date last year. This decrease as a percent of sales is also the result of higher commodity costs, which were up 28%, exclusive of the acquisitions, over the prior year’s costs. Year-to-date, gross margin also was impacted negatively by $1.7 million in costs related to a plant closing in the second quarter of 2008. The costs associated with the plant closing did not impact gross margin as a percent of sales. These increased costs were partially offset by sales gains, improved manufacturing efficiencies, and lower labor costs as a percent of sales.

Selling, marketing, and administrative costs as a percent of sales for the quarter were 37.7% compared to 38.2% in the prior year. Year-to-date, selling, marketing, and administrative costs as percent of sales were 37.2% compared to 38.6% last year. These improvements as a percent of sales were due primarily to increased sales and lower employee-related and logistics costs as a percent of sales. Though rising energy costs continued through the third quarter, logistics costs as a percent of sales decreased due to the company’s continued efforts to minimize miles traveled and to locate production closer to markets served.

During the second quarter of 2008, the company recorded a gain of $2.3 million relating to the sale and closure of a manufacturing facility. Year-to-date, costs of $1.7 million were recorded in cost of goods sold and $0.3 million of costs were recorded as selling, marketing and administrative costs relating to this closure, therefore, the net effect on earnings of the closure was $0.3 million year-to-date. The costs consisted primarily of severance, write-off of obsolete inventory, and equipment removal costs. Also, during the second quarter of 2008, the company received final insurance proceeds of $0.7 million relating to property damage at one of the company’s distribution centers last year. During the third quarter of 2007, the company received insurance proceeds of $0.7 million related to this distribution center and an equipment fire at one of its manufacturing facilities.

Depreciation and amortization expenses for the third quarter and year-to-date remained relatively stable as a percent of sales compared to the prior year despite an increase in both depreciation and amortization resulting from the acquisitions. Net interest income for the third quarter was $1.0 million lower than the prior year third quarter due to increased interest expense relating to debt issued for the two acquisitions. Year-to-date, net interest income was $1.3 million higher than 2007 year-to-date due to higher interest income related to the sale of new territories to independent distributors, partially offset by increased interest expense on debt issued for the acquisitions. The effective tax rate for the quarter and year-to-date was 35.7% and is in line with the estimated full-year tax rate of approximately 36.0%.

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Operating margin for the third quarter and year-to-date was 7.4%, as compared to 7.3% for the third quarter and year-to-date last year. EBITDA for the quarter was $59.8 million, or 10.4% of sales, an increase of 19.8% over EBITDA for the third quarter of 2007. EBITDA for the year-to-date was $187.2 million, or 10.4% of sales, an increase of 14.0% over the prior year.

Cash and cash equivalents at the end of the quarter were $17.4 million. For the year-to-date, net cash provided by operating activities was $48.9 million, with $68.5 million invested in capital improvements and $39.3 million paid in dividends to shareholders. During the third quarter, the company invested $26.5 million in capital improvements and paid dividends totaling $14.0 million to shareholders. Under its share repurchase program, the company acquired 1.5 million shares of its common stock for $38.2 million during the quarter, an average of $26.12 per share. Since the inception of the share repurchase plan, the company has acquired 20.9 million shares of its common stock for $324.5 million, an average of $15.56 per share. The plan authorizes the company to repurchase up to 30.0 million shares of common stock.

During the third quarter, the company entered into a $150 million five-year senior unsecured term loan facility to partially fund the purchase of Holsum Bakery and ButterKrust Bakery.

The board of directors will consider the dividend at its regularly scheduled meeting. Any action taken will be announced following that meeting.

Conference Call

Flowers Foods will broadcast its third quarter conference call over the Internet at 10:00 a.m. (Eastern) November 6, 2008. The call will be broadcast live on Flowers’ Web site, www.flowersfoods.com, and can be accessed by clicking on the web cast link on the home page. The call also will be archived on the company’s Web site.

Company Information

Headquartered in Thomasville, Ga., Flowers Foods is one of the nation’s leading producers and marketers of packaged bakery foods for retail and foodservice customers. Among the company’s top brands are Nature’s Own, Whitewheat, Cobblestone Mill, Blue Bird, and Mrs. Freshley’s. Flowers operates 39 bakeries that are among the most efficient in the baking industry. Flowers Foods produces, markets, and distributes fresh bakery products that are delivered to customers daily through a direct-store-delivery system serving the Southeast, Southwest, and Mid-Atlantic. The company also produces and distributes fresh snack cakes and frozen breads and rolls nationally through warehouse distribution. For more information, visit www.flowersfoods.com.

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Statements contained in this press release that are not historical facts are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. Other factors that may cause actual results to differ from the forward-looking statements contained in this release and that may affect the company’s prospects in general include, but are not limited to, (a) competitive conditions in the baked foods industry, including promotional and price competition, (b) changes in consumer demand for our products, (c) the success of productivity improvements and new product introductions, (d) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer’s business, (e) fluctuations in commodity pricing, (f) our ability to fully integrate recent acquisitions into our business, and (g) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value. In addition, our results may also be affected by general factors such as economic and business conditions (including the baked foods markets), interest and inflation rates and such other factors as are described in the company’s filings with the Securities and Exchange Commission.

Investor Contact: Marta J. Turner, Executive VP/Corporate Relations, (229) 227-2348

Media Contact: Mary A. Krier, VP/Communications, (229) 227-2333

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Flowers Foods

Consolidated Statement of Income
(000’s omitted, except per share data)

	For the 12 Week			For the 12 Week			For the 40 Week			For the 40 Week
	Period Ended			Period Ended			Period Ended			Period Ended
	10/04/08			10/06/07			10/04/08			10/06/07
Sales	$	575,937		$	475,225		$	1,793,300		$	1,563,010
Materials, supplies, labor and other production costs		298,792			244,321			942,356			796,215
Selling, marketing and administrative expenses		217,382			181,727			666,719			603,282
Depreciation and amortization		17,373			15,357			54,318			50,590
Gain on sale		0			0			2,306			0
Gain on insurance recovery		0			718			686			718
Income before interest, income taxes and minority interest (EBIT)		42,390			34,538			132,899			113,641
Interest income, net		1,011			1,985			7,165			5,850
Income before income taxes and minority interest (EBT)		43,401			36,523			140,064			119,491
Income tax expense		15,519			12,788			50,012			42,202
Income before minority interest		27,882			23,735			90,052			77,289
Minority interest in variable interest entity		(467	)		(1,234	)		(2,905	)		(4,105	)
Net income	$	27,415		$	22,501		$	87,147		$	73,184
Per share amounts:
Net income		0.29		$	0.24		$	0.94		$	0.79
Diluted weighted average shares outstanding		93,297			92,524			92,707			92,234

Flowers Foods

Segment Reporting
(000’s omitted)

	For the 12 Week			For the 12 Week			For the 40 Week			For the 40 Week
	Period Ended			Period Ended			Period Ended			Period Ended
	10/04/08			10/06/07			10/04/08			10/06/07
Sales:
Direct-Store-Delivery	$	480,783		$	385,525		$	1,475,466		$	1,260,751
Warehouse Delivery		95,154			89,700			317,834			302,259
	$	575,937		$	475,225		$	1,793,300		$	1,563,010
EBITDA:
Direct-Store-Delivery	$	59,678		$	46,858		$	177,568		$	153,230
Warehouse Delivery		8,168			9,075			31,266			31,509
Flowers Foods		(8,083	)		(6,038	)		(21,617	)		(20,508	)
	$	59,763		$	49,895		$	187,217		$	164,231
Depreciation and Amortization:
Direct-Store-Delivery	$	13,851		$	12,244		$	41,962		$	40,093
Warehouse Delivery		3,622			3,165			12,000			10,638
Flowers Foods		(100	)		(52	)		356			(141	)
	$	17,373		$	15,357		$	54,318		$	50,590
EBIT:
Direct-Store-Delivery	$	45,827		$	34,614		$	135,606		$	113,137
Warehouse Delivery		4,546			5,910			19,266			20,871
Flowers Foods		(7,983	)		(5,986	)		(21,973	)		(20,367	)
	$	42,390		$	34,538		$	132,899		$	113,641

Note: During the second quarter of 2008, the company’s Tucker, Georgia operation was transferred from the Direct-Store-Delivery segment to the Warehouse Delivery segment. Prior year information has been reclassified to reflect this change for comparability purposes.

Flowers Foods

Condensed Consolidated Balance Sheet
(000’s omitted)

	10/04/08
Assets
Cash and Cash Equivalents	$	17,383
Other Current Assets		354,028
Property, Plant & Equipment, net		591,103
Distributor Notes Receivable (includes $11,793 current portion)		104,466
Other Assets		38,833
Cost in Excess of Net Tangible Assets, net		305,583
Total Assets	$	1,411,396
Liabilities and Stockholders’ Equity
Current Liabilities	$	274,736
Bank Debt (includes $15,000 current portion)		264,500
Other Debt and Capital Leases (includes $3,832 current portion)		30,919
Other Liabilities		144,257
Minority Interest in Variable Interest Entity		9,167
Common Stockholders’ Equity		687,817
Total Liabilities and Stockholders’ Equity	$	1,411,396

Flowers Foods

Condensed Consolidated Statement of Cash Flows
(000’s omitted)

	For the 12 Week			For the 40 Week
	Period Ended			Period Ended
	10/04/08			10/04/08
Cash flows from operating activities:
Net income	$	27,415		$	87,147
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		17,373			54,318
Minority interest in variable interest entity		467			2,905
Stock compensation		2,594			9,271
Changes in assets and liabilities		(55,074	)		(104,785	)
Net cash (disbursed for)/provided by operating activities		(7,225	)		48,856
Cash flows from investing activities:
Purchase of property, plant and equipment		(26,506	)		(68,470	)
Acquisitions, net of cash acquired		(168,087	)		(168,087	)
Other		(1,628	)		(1,388	)
Net cash disbursed for investing activities		(196,221	)		(237,945	)
Cash flows from financing activities:
Dividends paid		(13,953	)		(39,311	)
Stock options exercised		240			2,679
Income tax benefit related to stock awards		264			1,977
Stock repurchases		(38,243	)		(44,072	)
Payment of financing fees		(747	)		(747	)
(Decrease)/Increase in book overdraft		(3,775	)		5,214
Proceeds from debt borrowings		426,000			456,000
Debt and capital lease obligation payments		(168,489	)		(195,246	)
Net cash disbursed for financing activities		201,297			186,494
Net decrease in cash and cash equivalents		(2,149	)		(2,595	)
Cash and cash equivalents at beginning of period		19,532			19,978
Cash and cash equivalents at end of period	$	17,383		$	17,383

Flowers Foods

Reconciliation of Net Income to EBITDA from Continuing Operations
(000’s omitted)

	For the 12 Week			For the 40 Week
	Period Ended			Period Ended
	October 4, 2008			October 4, 2008
Net Income	$	27,415		$	87,147
Minority interest in variable interest entity		467			2,905
Income tax expense		15,519			50,012
Interest income, net		(1,011	)		(7,165	)
Depreciation and amortization		17,373			54,318
EBITDA from Continuing Operations	$	59,763		$	187,217