Core Insights - Dave's Killer Bread is launching organic Sandwich Rolls in two varieties: 21 Whole Grains and Seeds and Sandwich Rolls Done Right, aiming to enhance the sandwich experience for consumers [1][2][3] Product Details - The new Sandwich Rolls are designed for various uses, including sub sandwiches, hot dogs, and French bread pizzas, emphasizing convenience and versatility [2] - The 21 Whole Grains and Seeds variety contains 16g of whole grains and 11g of protein (11% Daily Value) per serving, while the Sandwich Rolls Done Right offers 10g of whole grains and 11g of protein (11% Daily Value) [3] Brand Positioning - Dave's Killer Bread is recognized as America's 1 organic bread brand, with a commitment to high-quality, organic ingredients, and is certified USDA organic and Non-GMO Project Verified [4][5] - The brand is also focused on social responsibility, employing individuals with criminal backgrounds, with one in three employee-partners at its Oregon bakery having such a background [5]

Company Overview - Flowers Foods, Inc. (FLO) is a producer and seller of bakery food products in the United States, with a portfolio that includes brands such as Nature's Own, Dave's Killer Bread, Canyon Bakehouse, and Wonder [1]. Investment Philosophy - The investment philosophy focuses on identifying mispriced securities by understanding the drivers behind a company's financials, often revealed through a DCF model valuation. This approach allows for a flexible investment strategy that encompasses various stock prospects to assess risk-to-reward [1].

Company Overview - Wonder Bread, founded in 1921, is an iconic brand known for popularizing sliced bread and remains a staple in American households [4] - The brand is part of Flowers Foods, Inc., which reported sales of $5.1 billion in 2024 and is one of the largest producers of packaged bakery foods in the U.S. [5] Product Launch - Wonder has launched its first line of snack cakes, expanding its product offerings beyond bread [1][2] - The new line includes a variety of treats designed for lunchboxes and sweet cravings, such as Crème-Filled Chocolate Cupcakes, Glazed Honey Buns, and Powdered Mini Donuts [6] Marketing and Branding - The new treats feature fresh packaging that maintains the brand's classic identity while appealing to modern consumers [3] - The brand aims to evoke nostalgia and joy, similar to the feelings associated with Wonder bread, by introducing these new products [2]

Core Insights - Flowers Foods, Inc. has completed the acquisition of Simple Mills, enhancing its position in the healthier snack market and addressing the rising demand for better-for-you alternatives [1][3][11] Company Overview - Simple Mills, founded in 2012, has become a prominent brand in the natural food sector, offering premium snacks with a focus on clean ingredients and taste, distributed in over 30,000 stores [2] - The acquisition allows Flowers Foods to diversify its product categories and strengthen its presence in the snacking segment [3][4] Strategic Initiatives - Flowers Foods aims to broaden distribution, accelerate innovation, and enhance brand awareness post-acquisition, which is expected to drive growth and profitability [3][11] - The company is actively pursuing acquisitions to expand its brand portfolio and geographic reach, with past acquisitions including Papa Pita Bakery and Dave's Killer Bread [4] Market Positioning - The company is shifting towards premium products, investing in gluten-free, organic, and keto-friendly options to align with evolving consumer dietary trends [5] - Flowers Foods is implementing pricing and cost-saving initiatives while focusing on phasing out low-margin businesses to enhance overall business efficiency [6] Challenges and Performance - Despite strategic efforts, Flowers Foods faces challenges in sustaining growth due to competitive pressures and inflation, impacting its fourth-quarter performance [7] - The company's stock has declined by 14.7% over the past three months, underperforming compared to the industry and the S&P 500 [8]

Core Insights - Vestar Capital Partners has completed the sale of Simple Mills to Flowers Foods for an enterprise value of $795 million, marking a successful exit for the private equity firm [1] - The investment in Simple Mills, initiated in October 2019, was driven by a shift towards better-for-you foods and the unique potential of the Simple Mills brand, resulting in consistent double-digit topline growth during Vestar's ownership [2] - Vestar's strategy involved expanding distribution channels, supporting product innovation, investing in marketing and R&D, and strengthening the supply chain, which collectively contributed to significant value creation [2][3] Company Overview - Simple Mills is recognized as a premium brand offering better-for-you snacks, including crackers, cookies, snack bars, and baking mixes [1] - Vestar Capital Partners specializes in management buyouts and growth capital investments, focusing on building long-term enterprise value in sectors such as Consumer, Business & Technology Services, and Healthcare [4] - Since its inception in 1988, Vestar has invested over $12 billion in 94 companies, with a total value of approximately $61 billion, including more than 200 add-on acquisitions [4]

Company Overview - Flowers Foods, Inc. is one of the largest producers of packaged bakery foods in the United States, with net sales of $5.1 billion in 2024 [3] - The company operates bakeries nationwide, producing a wide range of bakery products under top brands such as Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, and Tastykake [3] Acquisition Details - Flowers Foods has completed the acquisition of Simple Mills, a leading natural brand known for premium better-for-you snacks including crackers, cookies, snack bars, and baking mixes [1][2] - This acquisition is expected to enhance Flowers Foods' presence in the better-for-you snacking segments, diversify category exposure, and improve growth and margin prospects [2] Simple Mills Overview - Simple Mills, founded in 2012, is recognized for its high-quality, nutritious ingredients that deliver exceptional taste, disrupting traditional grocery categories [4] - The brand is the leading natural cracker brand in the multi-outlet (MULO) channel, with distribution in over 30,000 stores across the nation [4]

Sales and Revenue Growth - The company expects to grow sales by 1% to 2% annually and EBITDA by 4% to 6% annually, excluding any future acquisitions[29]. - In Fiscal 2024, branded retail sales represented 63.9% of total sales, with Nature's Own generating estimated retail sales of $1.5 billion[40][45]. - Walmart/Sam's Club accounted for 22.4% of the company's sales in Fiscal 2024, highlighting the importance of major customer relationships[47]. - Net sales for Fiscal 2024 were $5,103,487, a 0.2% increase from $5,090,830 in Fiscal 2023[220]. - The company anticipates Fiscal 2025 sales growth driven by optimization of the non-retail business and new product innovation[225]. Acquisitions and Investments - The company completed the acquisition of Papa Pita on February 17, 2023, enhancing production capacity and distribution in the western U.S.[29][30]. - The company completed the acquisition of Papa Pita for $274.8 million in cash on February 17, 2023[245][251]. - The company entered into a $795.0 million Term Loan Facility for the Simple Mills Acquisition, which was later terminated in favor of issuing new notes[259]. - The company issued $500.0 million of 5.750% Senior Notes due 2035 and $300.0 million of 6.200% Senior Notes due 2055 to fund the Simple Mills Acquisition[264]. Product Development and Innovation - The company plans to roll out new products including DKB snack bites and Wonder branded cake products in Fiscal 2025[43][44]. - The company plans to launch the national rollout of DKB snack bites in Fiscal 2025[227]. Financial Performance - Income from operations rose to $348,292, representing a 101.5% increase compared to $172,870 in the previous year[219]. - Net income increased to $248,116, up 101.0% from $123,416 in Fiscal 2023[219]. - Comprehensive income increased to $254,325, up 107.5% from $122,563 in Fiscal 2023[219]. - The effective tax rate for Fiscal 2024 was 24.6%, up from 21.4% in the prior year[237]. Cost Management and Efficiency - Materials, supplies, labor, and other production costs as a percentage of sales decreased to 50.5% from 51.7%[229]. - Selling, distribution, and administrative expenses as a percentage of sales decreased to 39.2% from 41.6%[231]. - Ingredient and packaging costs were volatile in Fiscal 2024 and 2023, but reduced volatility is expected in Fiscal 2025, excluding potential tariff impacts[58]. - The company utilizes forward purchase agreements and other financial instruments to manage raw material price volatility, which could significantly affect earnings if availability decreases[58][194]. Employee and Community Engagement - The company employs approximately 10,200 employees and 4,100 long-term leased employees, with 830 employees covered by collective bargaining agreements[67]. - The company has committed to donating $3.4 million to the USO through 2026, having already donated $2.8 million through Fiscal 2024[71]. - The company has implemented various employee development programs, including a Learning Management System and annual performance reviews to support career progression[73]. Capital Expenditures and Liquidity - Capital expenditures for Fiscal 2024 were $132.1 million, including $6.0 million for the ERP upgrade, while the company anticipates capital expenditures of $140.0 million to $150.0 million for Fiscal 2025[245][251]. - Total available liquidity as of December 28, 2024, was $569.4 million, consisting of cash on hand and available balances under credit facilities[242]. - The company incurred costs of approximately $238 million related to the ERP system upgrade project, with an expected total cost of around $350 million[243]. Debt and Shareholder Returns - Dividends paid to shareholders increased to $203.0 million in Fiscal 2024 from $195.2 million in Fiscal 2023, reflecting a growth of approximately 4.6%[245][252]. - The company repurchased $22.7 million of its common stock in Fiscal 2024, down from $45.8 million in Fiscal 2023[245][252]. - A total of 1.0 million shares were repurchased at a cost of $22.7 million during Fiscal 2024, compared to 1.9 million shares at a cost of $45.8 million in Fiscal 2023[268]. - Long-term debt and right-of-use lease obligations totaled $1,276,109,000 as of December 28, 2024, down from $1,285,039,000 on December 30, 2023[253]. Compliance and Risk Management - The company is currently in substantial compliance with all material federal, state, and local laws and regulations affecting its operations[60][61]. - The company expects to face potential risks from global economic volatility, including inflation and supply chain disruptions, which could impact future cash flows[241]. - Changes in accounts payable were primarily driven by volatility in input costs and timing of capital spending, with a net change of $(59.6) million in Fiscal 2024[247][250].

Core Viewpoint - Flowers Foods, Inc. has announced a public offering of $500 million in 5.750% Senior Notes due 2035 and $300 million in 6.200% Senior Notes due 2055 to fund its acquisition of Purposeful Foods Holdings, Inc. and for general corporate purposes [1][2]. Group 1: Offering Details - The offering includes $500 million of 5.750% Senior Notes maturing on March 15, 2035, and $300 million of 6.200% Senior Notes maturing on March 15, 2055 [1]. - The expected closing date for the offering is February 14, 2025, subject to customary closing conditions [1]. Group 2: Use of Proceeds - The net proceeds from the offering will be used to fund the cash consideration for the acquisition of Purposeful Foods Holdings, pay related fees and expenses, and for general corporate purposes [2]. Group 3: Company Overview - Flowers Foods, Inc. is one of the largest producers of packaged bakery foods in the U.S., with net sales of $5.1 billion in 2024 [6]. - The company operates bakeries nationwide and produces a variety of bakery products under brands such as Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, and Tastykake [6]. Group 4: Underwriters - The offering is managed by BofA Securities, Deutsche Bank Securities, RBC Capital Markets, and Wells Fargo Securities as active book-running managers [3]. - Co-managers for the offering include PNC Capital Markets, Rabo Securities USA, Regions Securities, and Truist Securities [3]. Group 5: Regulatory Information - The offering is made under an automatic shelf registration statement filed with the SEC on August 21, 2023, and will be conducted via a prospectus supplement and accompanying base prospectus [4].

Financial Data and Key Metrics Changes - The company experienced growth in both dollars and units across its branded bread portfolio, aided by innovation and strong market execution [7] - Financial guidance for 2025 is cautious due to potential tariffs, commodity volatility, and weak consumer demand [8][9] Business Line Data and Key Metrics Changes - The away-from-home business saw improved sales and margins despite some deliberate business exits [7] - Significant weakness was noted in the sweet baked goods category, impacting revenue and volume growth [8] Market Data and Key Metrics Changes - The company reported a record household penetration for Dave's Killer Bread, indicating strong consumer interest despite some consumption data showing a decline [20] - The promotional environment remains elevated, affecting overall demand and pricing strategies [41][42] Company Strategy and Development Direction - The company is focusing on innovation and expanding its portfolio to capitalize on current and long-term trends, particularly with the addition of Simple Mills [8][9] - There is a strategic shift towards more differentiated premium items, responding to changing consumer preferences away from traditional white and soft variety breads [46][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strength of their brands and innovation capabilities, despite a cautious outlook for the near term [9] - The company is preparing for potential impacts from GLP-1 drugs on consumer behavior, positioning its portfolio to meet new consumer demands [29][30] Other Important Information - The company is implementing a transition to a company-owned distribution model in California, which is expected to enhance control over operations and service [128] - The introduction of smaller loaves is being tested to meet consumer needs and reduce waste, with plans for potential expansion across brands [88][130] Q&A Session Summary Question: Concerns about Dave's Killer Bread consumption data - Management acknowledged challenges but emphasized strong brand performance and upcoming innovations to support growth [17][20] Question: Dynamics of first-half and second-half performance - Management indicated that the first half would benefit from new business and pricing, while the second half may see continued inflation in input costs [25][26] Question: Impact of GLP-1 drugs on consumer behavior - Management noted conflicting research but expressed confidence in their portfolio's alignment with potential consumer shifts [27][29] Question: Caution regarding category performance and pricing power - Management attributed caution to overall demand pressure and a shift away from soft variety breads, while highlighting successful innovations [35][36] Question: Expectations for legacy business growth in 2025 - Management projected modest growth driven by premium brand performance and new product launches, particularly in the second quarter [84][85] Question: Promotional landscape and competitive dynamics - Management stated that their market share performance has improved despite competitors' aggressive promotions, maintaining a focus on brand strength [138][139] Question: Rationale for expanding Wonder into sweet baked snacks - Management explained that addressing the sweet baked goods category is necessary, and they believe the Wonder brand can successfully penetrate this market [144] Question: Insights from Circana research on GLP-1 drugs - Management cautioned that the research is one data point among many, emphasizing the need to adapt to evolving consumer preferences [146][147]

Flowers Foods (FLO) Q4 2024 Earnings Call February 07, 2025 08:30 AM ET Company Participants J.T. Rieck - Vice President of Investor Relations and TreasurerRyals McMullian - Chairman & CEOSteve Kinsey - CFOBill Chappell - Managing DirectorRob Dickerson - Managing Director - Consumer Staples Equity ResearchMitchell Pinheiro - DirectorMax Gumport - Director - Equity Research Conference Call Participants Steve Powers - Equity Research AnalystJim Salera - Research AnalystBrian Holland - MD - Research Analyst Op ...