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Flowers Foods Q1 Profit Declines, Yet Meets Estimates; Backs FY View - Update

Flowers Foods, Inc. (FLO), a producer of fresh packaged bakery foods, Thursday reported a decline in first-quarter profit, reflecting higher costs, despite a rise in sales. Earnings per share met analysts' expectations, while revenues missed view. The company also backed its outlook for full year 2014.

According to the company, its DSD segment delivered solid sales growth and operating results, despite added costs associated with Hostess acquisition, start-up of added production capacity, and new market expansion.

Allen Shiver, president and chief executive officer of the company said, "In the near term, added costs associated with our rapid geographic growth impact margins to some extent. However, our team believes Flowers' expanded DSD footprint will help us reach our stated sales, earnings, and margin goals over the longer term."

Selling, distribution, and administrative or SD&A costs as a percent of sales were 36.8 percent, up 40 basis points from last year, due to distributor fees and costs associated with new market expansion, and acquisition-related costs of $4.6 million negatively impacted SD&A.

Depreciation and amortization expenses increased 40 basis points, mainly due to acquired Hostess assets.

For the 16-week period ended April 19, 2014, the company's net income dropped to $61.07 million or $0.29 per share from $112.03 million or $0.53 per share last year.

On an adjusted basis, earnings per share for the prior-year quarter were $0.31 per share. On average, eight analysts polled by Thomson Reuters expected earnings per share of $0.29 for the quarter. Analysts' estimates typically exclude one-time items.

Quarterly sales increased 2.6 percent to $1.16 billion from $1.13 billion last year. Analysts estimated revenues of $1.22 billion for the quarter.

The company said the increase in sales was due to positive net price/mix of 2.9 percent, and contributions from the Sara Lee/California acquisition of 1.2 percent, but was partially offset by decreased volume of 1.5 percent.

Sales from DSD segment increased 5 percent, while warehouse segment sales were down 8.3 percent from last year.

For full year 2014, the group continues to expect earnings per share in the range of $0.98 to $1.05, on sales of $3.976 billion to $4.126 billion. Analysts estimate earnings of $1.03 per share, on revenues of $4.04 billion for the year.

FLO is currently trading at $20.76, down 0.10 percent.

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