Flowers Foods, Inc. (NYSE: FLO), the nation's second-largest producer and marketer of fresh packaged bakery foods, has reported results for its 16-week first quarter ended April 19, 2014. 

First quarter sales increased 2.6% compared to the first quarter last year, reflecting positive net price/mix of 2.9%, an acquisition contribution of 1.2%, partially offset by decreased volume of 1.5%.

Sales for the DSD segment were up 5.0%; warehouse segment sales were down 8.3%.

Net income for the quarter was $61.1 million, or $0.29 per diluted share, including the negative impact of $0.03 per share of acquired facilities' carrying costs and interest expense to fund the acquisition.

Sales of the reintroduced Hostess bread brands Wonder, Home Pride, Merita, and Butternut were approximately $41.8 million in the quarter.

The company opened a bread line in Modesto, Calif., to help provide product for the California market, and opened the former Hostess bakery in Knoxville, Tenn., this week.

The company increased Flowers' bread, bun, and roll branded market share to 14.1 dollar share from 12.8 dollar share in the year-ago quarter, as per IRi market data.

Announced goal for direct-store-delivery ("DSD") segment to reach 90% of the U.S. population by 2018 and achieve a 20 share of bread, buns, and rolls and a 12 share in snack cake in the IRi U.S. market, driven by market expansion and future strategic acquisitions.

Allen L. Shiver, president and chief executive officer, said, "The results reported for the quarter reflect the underlying strength of our company. The DSD segment delivered solid sales growth and operating results, despite added costs associated with the Hostess acquisition, start-up of added production capacity, and new market expansion. Our acquired bread brands drove share gains, especially in new markets. As previously discussed, the warehouse segment has experienced pressure since the return of Hostess cake to the market in mid-July 2013. However, we are pleased to have maintained a significant portion of the total cake business we gained following Hostess' liquidation in November 2012.

"Cash flow in the quarter was strong and we paid down $81.2 million in debt.  Our investments in Sara Lee/California and in the Hostess assets have helped the company extend its geographic reach to key population centers and to grow market share for breads, buns, and rolls.

"In March, we announced plans for the closed bakeries we acquired from Hostess. We have listed nine closed bakeries and 21 warehouses for sale.  When those transactions are completed, annual carrying costs for the Hostess facilities will be reduced by approximately $10 million," Shiver said. "In addition to the two bakeries we recently put into production, we expect to open another five or six over the next few years, as determined by market demand. As we continue to expand our DSD markets, we will strategically open acquired bakeries to leverage volume and share gains more rapidly than in the past."

Commenting on outlook, Shiver 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. Our recent investments, combined with our decades long commitment to developing efficient bakeries, strong brands, effective distribution, and an experienced team, position Flowers Foods well for the future."  

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