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Executives

Marta J. Turner - EVP of Corporate Relations

George E. Deese - Chairman, CEO and President

R. Steve Kinsey - EVP and CFO

Analysts

Heather Jones - BB&T Capital Markets

Diane Geissler - Merrill Lynch

Eric Katzman - Deutsche Bank

Timothy Ramey - D. A. Davidson & Co.

Mitch Pinheiro - Janney Montgomery Scott LLC

Farha Aslam - Stephens Inc

David Leibowitz - Horizon Asset Managements

John Emerich - Iron Works Capital

Flowers Foods, Inc. (FLO) Q3 FY08 Earnings Call November 6, 2008 10:00 AM ET

Operator

Greetings, and welcome to the Flowers Foods Third Quarter 2008 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Marta Turner. Ms. Turner, please begin.

Marta J. Turner - Executive Vice President of Corporate Relations

Thanks you Keith. And good morning, everyone. Thank you for joining us. On the call with us today are George Deese, our Chairman of the Board, Chief Executive Officer and President; and Steve Kinsey, Executive Vice President and Chief Financial Officer. We'll discuss our third quarter results and earnings guidance we gave you in our release this morning. And, of course, then we'll open up for questions as Keith mentioned.

Our earnings release is posted on the website as is our updated IR fact sheets and will file the 10-Q on November, the 13th. I do want to mention that we are going to have a management meeting, our management team will be in the New York for company's sponsored event on Tuesday, December the 2nd. We hope you'll mark your calendar to join us at that meeting either in personal or on the webcast.

Now, of course, before we began our you know that I must point out that our presentation today may include forward-looking statements about our company's performance. Those comments may include discussion about a number of factors regarding future performance such as earnings per share, net sales, margin, operating profit, interest expense, tax rate, cash flow, and other items. These statements are based on our view of things as they are today, but they may contain some degree of uncertainty. While we believe our statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially.

In addition to the matters we'll talk about during the call, important factors relating to Flowers Foods business are detailed fully in our filings with the SEC.

Now, I'm pleased to turn the call over to our Chairman, CEO and President, George Deese.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you, Marta. Good morning and thank you for joining our call this morning. Let me start by saying that I certainly feel that Flowers Food is fortunate. We are fortunate to be in the food business. We are fortunate that our primary business is bread a consumer staple that consumers buy in good times and in challenging times. We're fortunate to have developed operating strategies over several decades and those strategies work.

We have a sound business model there, over the long-term generates the significant cash to up front our growth and reward our shareholders. We're fortunate to have the foresight to continue invest in our bakeries to improve efficiencies and quality. And to have the foresight to build two strong brands, such as Nature's Own and Whitewheat and continue to grow with our local brands as well.

We have listened to the market and developed products that meet consumers' needs. And we have embraced innovation in all aspects of our business. Our information systems help us see into our performance daily. Allowing us to quickly address changes in the marketplace. We're also very fortunate to have a team with experience and the confidence to manage our business even in challenging times. These strengths allow us to reward shareholders over time by creating value through this business of baking bread.

Finally, we are fortunate that you have confidence in our ability to continue building shareholder value in the future. That confidence shows in Flowers Foods performance in the market, especially in the past several weeks. For that I'd say thank you.

Rest assured that our team does not take our fortunate situation for granted; we are working diligently to further execute our strategies, to outperform in the marketplace and to continue delivering value for our consumers, customers and shareholders.

Now let's take a quick look at out third quarter results. We delivered strong sales and earnings growth for the quarter. Out products, our bakeries and our teams performed very well as we continued our efforts to improve efficiencies and reduce operating cost.

In the quarter, we completed two acquisitions, weathered three hurricanes and continued to grow our business even as the economy and the financial market experienced turbulent times.

Our sales were up 21.2%, driven by our recent acquisitions, good unit growth and pricing. Net income was up 21.8%. Earnings per share increased 20.8% and EBITDA for the quarter was 10.4% of sales.

I want to thank our baker teams for exceptional work during the quarter. They achieved a 3% improvement in manufacturing efficiencies. Even that improvement and our pricing actions were not enough to offset our higher input costs. And we saw gross margins decline by 50 basis points in the quarter.

However, we delivered good results by achieving further improvement in our SG&A costs and that offset our lower gross margin. Our continuing efforts to move production closer to the market and to reduce our logistics costs help reduce our SG&A expenses.

Now let's take a closer look at our sales categories. In the quarter, our branded retail sales were up some 20%. Delivering this strong growth, dollar growth as well as unit growth shows the Flowers' business continuously strong even in the phase of economic uncertainty.

Across all product categories, sour branded products achieve solid growth, showing the strength of our Nature's Own, Whitewheat and the other brands.

Information from IRI once again shows that our brands gain share in both dollars and units in the quarter. And that we outperformed the fresh package bread category.

As I mentioned, our brand delivered across all categories. Our branded white bread led by Whitewheat and regional brands were up double-digits, which is well ahead of the category.

In the soft variety category, our Nature's Own brand achieved similar growth with sales growth of an excess of 19%. Nature's Own all premium bread delivered double-digit growth. Our branded buns and rolls and our snack cake brands also were up double-digits for the quarter.

Sales of store brand, our private label bread, buns and rolls also were up in quarter although not as expense of our brands. In the categories all private label outperformed the category growth. I know you asked this question many times.

Private label has been a strong presences in the fresh bakery category for several decades, holding about a 25% share of dollars and roughly 40% share of units in the fresh package bread and roll category.

When the economy is troubled, consumers typically more at home and buy more bakery items because those purchases help stretch the food dollar. For that reason, private label brand is experiencing some growth. But as I mentioned earlier Flowers brands continues to experience strong growth as well.

Turning briefly to our food service business. Food service was stable with the growth, this quarter driven by pricing and a recent acquisition.

Few of the highlights Id' like to mention for the third quarter. As you know we completed the merger with Holsum in Phoenix and the acquisition of the ButterKrust Bakery in Lakeland early in the quarter.

In light of the economy and marketplace challenges, some have asked if we would do again if we had known what was ahead of us. The answer is an overwhelmingly yes. You might ask why. I feel that because of these acquisitions fit so well with our growth strategy. Both bring efficient bakeries, talented teams, great products and great access to the market.

Both have the potentials to contribute to our long-term performance and the creation of shareholder value. And bring you up-to-date on where we are with integration of Holsum and ButterKrust.

First, Steve will report the sales and earnings from these acquisition are attracting as we expected. We already capturing synergies in both the areas, particularly down in Florida. We are bringing both companies into our information systems first ButterKrust by year end and Holsum in first quarter of next year.

Also I'm happy to say that this week consumers in Arizona and Las Vegas area are seeing Nature's Own breads in their market for the first time as Holsum distributors introduce the brand across their territories.

Our growth potential is solid with both acquisitions and these new operations help meet our capacity needs that we've been talking about now for several years. We continued to go in the new markets. During the third quarter, we did enter the St. Louis market and the Wichita, Kansas market.

As you remember, our market expansion efforts over time have contributed about 1% a year to our DSP sales. We will continue to push our boundaries to reach new markets, with Nature's own and Whitewheat and our other brands.

Talk a little bit more about capacity. When we announced our market expansion strategy in 2004, I told you we will need to build or buy a bakery about every 12 to 18 months to have the necessary reduction capacity keep up with the growth.

We have delivered on that promise, adding new bakeries in Denton, Texas; Newton, North Carolina, We also have added production lines to existing bakeries in other parts of the company.

Our newest bakery in Bardstown, Kentucky is well underway and we expect to begin production of bread there in the spring of '09.

You will remember that ButterKrust acquisition in Florida brings us substantial production capacity. And as a result, we will not need to deal with the new bakery in Florida as we had planned prior to the acquisition.

Hurricanes kept us active also for the quarter. As you know, we had three hurricanes in the quarter. I guess Ike was the most serious of those three. But I'm happy to say that our team executed our process preparedness plan flawlessly and did an excellent job of managing through these storms. Although we had two bakeries of that power for short-term, our products were in the market and our teams did a wonderful job.

And we did so with that... we do have experience but also sales took care of that so we are not seeing we had any extra calls for the quarter. There is no short of opportunities or as in the third quarter from acquisitions to hurricanes to growing economic crisis.

In the phase of all of that, our team remained focus on executing our strategies and once again delivering good results.

Now, I'll ask Steve Kinsey if few he will give you a more detailed report of the quarter. Steve?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Thank you, George and thank you all for joining our call today. This morning I will discuss our third quarter performance, renew the update at 2008 full year guidance and then discuss briefly to preliminary fiscal 2009 guidance.

As George said upfront, our third quarter performance was strong. We had robust sales growth in the quarter. And overall our margins both in dollars and percent faired well in the quarter.

Net income from the quarter improved roughly 22% quarter-over-quarter to $27 million.

Our operating margin or EBIT at a percent of the quarter was slightly up at 7.4% of sales. This is inline with our year-to-date EBIT margins which was also 7.4% of sales, which also was slightly up and compared to the same period last year. This improvement primarily was due to our increased sales on pricing, our efficiency gains in the quarter as well as our continued focus on driving cost sales, whether it's in above the line margin or in SG&A.

Our diluted earnings per share for the quarter grew approximately 21% to $0.29 per share and our year-to-date earnings per share was up almost 19% compared to prior year and $0.94 per share. As George said our brands continues to perform well in the marketplace. Our consolidated sales growth for the quarter was 21.2%, pricing and mix contributed 10.9% of that growth and volume represented 10.3% of the growth.

Looking at volume, acquisitions represented about 9% of the growth in the quarter and our core business without the acquisition was up about 1.2%.

Looking at our direct store delivery group or DSD, they also performed very well in the quarter as did our warehouse delivery group. If you take a look at the segments, the DSD sales were up 24.7% for the quarter, our pricing mix in that segment contributed about 10.6%. The DFD volume in the quarter was up 14.1% and again acquisitions added about 11.2% of the segment growth and the core markets were about 2% of the that growth. Also as George mentioned, our expansion market continued to trend about the 1% of sales out of the quarter.

Our warehouse delivery group sales were up 6.1% quarter-over-quarter with price and mix contributing about 8.9% of that growth. They did see a decline in the volume of about 2.8% of the volume decrease really helps primarily in the snack cake category.

As George mentioned some of the softness in the food service sectors seem to be stabilize and maybe that bottom out the trend hopefully return in that category.

Our year-to-date to the third quarter consolidated sales were up 14.7% to $1.8 billion for the same period of last year. The year-to-date increase was achieved through favorable pricing index of about 10.4% and our volume was up roughly 4.3%, with acquisitions contributing about 2.8% of the volume increase.

Looking at gross margins in the quarter, our gross margin dollars did increase about 20%. But as George said, our gross margin percentage declined 50 basis points to 48.1%. And again, it as been truthful the year, the primary driver for this decrease in gross margins has been the increase in our input costs in the quarter as well as the year and primarily as the input of increase in Flowers for the year. If you look at our total ingredients in the quarter ex the acquisitions, we were up about 21%.

However, looking back at the second quarter of 2008 this was a pretty significant improvement. If you recall, we had dropped in the quarter second quarter it's about 45.7% of sales.

So, as we had planned and discussed the back half is coming together nicely for us and as we talked about the full year guidance, you will see that we expect to have a good year.

We're still targeting a 47.5% to 48% of gross margin from the full year. And we do... and as you will see that year-to-date margin was down about 160 basis points, that's 47.5% compared to same period last year.

Our quarter-over-quarter and through year-to-date through the third quarter, if you look at the other components of cost of goods sold as a percent of sales, majority of them would be relatively flat to slightly down.

Our selling and marketing admin expense as a percent of sales for the quarter decreased to approximately 37.7% of sales, which is a 50 basis point improvement over the same period of last year. As George indicated, we are still focused on driving out distribution costs by moving production closer to the market. And we stay focused on trying to keep admin costs and selling the marketing cost in line.

We continually look for opportunities to improve margins. George mentioned our efficiency gains for the quarters and again, as we bring on new production capacity and we continually expand our markets, we will continue to look to move production closer to the market and continue to work on the distribution costs.

The decrease in net interest income for the quarter is the result of higher interest expense or debt services from the acquisition related loan and outstanding balances on our revolver. Interest expense for the quarter was $1.9 million and we estimate the full year interest expense to be approximately $5.7 million.

Now the higher interest expense was offset by interest income on our distributor notes. Looking at the third quarter tax rate of approximately 35.7%, it is inline with our full year expected rate of approximately 36%.

As you can see and I would have to say that our balance sheet probably shows there was obvious change in the quarter, which took out significant leverage in the quarter as a result of the acquisitions and also to meet certain working capital requirements.

Currently we're levered just above one time of short trailing 12 months EBITDA and we ended the quarter with roughly $265 million in bank debt. $170 million for this debt is related to the two acquisitions and the remaining $94.5 million or $95 million is primarily the result of working capital requirement in the share repurchases in the quarter.

Our working capital decline in the quarter really is attributable to our hedging activities and is based on how we cover and how the usage unfolds for the year, and as we'll indicate later sum in the next year. So are not having some margins call the needs as we move throughout the year.

During the quarter we did repurchase 1.5 million shares of common stock for $38.2 million. We funded approximately $26.5 million of capital expenditures and we paid dividends of $14 million.

For this year through the third quarter, cash flow from operations as you can see was still strong at about $50 million and we are well in compliance with our debt covenants at the end of the quarter. Looking ahead we're confident that our operating cash flows will continue to be strong and remain a primary source of cash.

If you look at our cash allocations, we will be focused on debt reduction as we move through remainder of this year and into next year in addition to the other items that we have historically cash on CapEx, dividend, share repurchases with the opportunity presents itself. And over time we have generated significant cash and there is no fundamental changes in our balance sheet. And we expect to continue this as we look out over the near term.

We have updated our 2008 guidance based on the year-to-date performance, as well as the impact of our recent acquisitions. We now project the 2008 sales will be approximately $2.42 billion to $2.43 billion as roughly an 18.8% to 19.3% increase over the prior year.

Price and mix are expected to provide 10% to 11% of this increase, volume at 6% to 6.5% and as you recall this is the 53 week for us in our fiscal year. And that we now is projected to provide about 2% of the increase. The overall volume growth of 6% and 6.5% does include acquisitions of 4.5% to 5% for the year.

Net income is now targeted to be approximately 4.7% to 4.8% of the sales or $113 million to $117 million for the year. If you look at the estimated shares to be outstanding are roughly $93 million, our targeted earnings per share for the year of a $1.22 to $1.26, an increase of 19.6% to 23.5%.

We anticipate the acquisitions and related integrated cost for the full year will be diluted again approximately $0.01 to $0.02. As George mentioned in the third quarter, they were basically neutral. I think a couple of factors contributed that one, the integrations are progressing nicely. There is a lot opportunity in the acquisitions and we're beginning to see some of that. And the third quarter we do not have the fourth quarter of interest expense nor one of the shares that were issued for the acquisition outstanding for the whole quarter.

With only nine weeks to left in the year, we are confident that our guidance from that we provided, as George said the category had proven to be pretty resilient with economic downturn. And we believe the current downturns should be no different.

This morning we also have given you preliminary sales and earnings guidance for 2009. Now if you look at the current financial crisis and the sudden downward movement commodities, volatility and uncertainty were definitely above words in our planning process for 2009.

From the early stages of our planning to the final plan, we've seen dramatic swings and input cost as commodities again fluctuated widely. And how that we remained steadfast in our execution of the strategy and philosophies that have worked well for Flowers Foods in the past.

We are projecting 2009 sales to increase by just over 12% to range of 14% to $2.72 billion or $2.765 billion. With the two recent acquisitions adding approximately 7%, 7.5% or so to this increase.

And as a reminder 2009 will be 52-week year compared to 53-weeks in fiscal 2008. Pricing and mix will contribute about 5% to 6% in volume, and growth excluding the acquisitions will be about 1% to 2% for year. This reflects sales growth ex-acquisitions in total for 2009 of 6% to 8% which is inline with our targeted long-term growth of 5% to 8% that we believe is necessary to obtain sustainable growth over time.

Based on these sales targets, net income for 2009 is estimated to be $124 million to $135 million or 4.6% to 4.9% of sales. To use the estimated average shares outstanding of $93.3 million, earnings per share for 2009 are targeted to be $1.33 to $1.45 per share or an increase of 9%, just over 15% compared to 2008.

Though we do not provide quarterly guidance, I think it's important to point out that we do anticipate tough comp from the first half of 2009, particularly in the first quarter, due primarily to input cost increases during that time period. And George will comment more on commodities in just a moment.

Capital spending is estimated to be between $75 million to $85 million for fiscal 2009 and new modeling depreciation and amortization expenses as a percent of sales should remain fairly consistent with the 2008 run-rate, and this does taken into account additional depreciation and amortizations of the recently acquired assets and intangible as well.

Like most companies our 2009 performance will be depended on consumers and whether buying patterns will change in the current economic time. I can assure you that we are keenly focused on these current trends. We are committed to growing sales and earnings and we are prepared to take whatever actions are necessary to maintain our unit and protect our brands. Our guidance at this point reflects our best estimates of current and projected trends.

On a lot recessionary times in the past, this too shall pass. And I think as Flowers are more successful for testing our brands and market share, we should emerge as an even stronger company when we pull out of this economic recession.

Now, I will turn it back to George.

George E. Deese - Chairman, Chief Executive Officer and President

Thanks Steve. As you can see from our updated guidance, we expect to deliver good results for 2008. And of course for the year ahead. As a reminder, our strategies are proven. Our business model works and our team is the most experienced and talented in the industry.

The guidance we've given you for 2009 shows that we expect to continue growing our business and delivering good results for our shareholders despite challenging economic trends.

Our hedging and forward bank strategy helps us have visibility for our cost. Once our future cost are defined, we do take our action to further improve efficiencies and take that cost wherever possible. Then, we take processing as needed in a timely matter.

On our second quarter call we told you that we expected our incremental input cost in 2009 to be similar in proportion to those who experience from 2007 to 2008. I need to fine tune that information for you.

As a cost of commodities and early input items have moderated in the last few weeks, we now expect 2009 input cost to be in the $75 million to $80 million, which is about 60% of our increased cost this year compared to last year.

We continued to execute our hedging strategies and we are affecting coverage for weak and other input items apart of 2009. That is all incorporated in the guidance we have given you today.

For competitive reasons I will not discuss these specifics of our coverage. I can tell you that our planning for 2009 is complete, and we have operations budgets in place as well as projections for sales and earnings that are reflected in our guidance today.

To help offset our higher input cost, we continued to make improvements and efficiencies and in logistics and to reduce cost wherever we can. That effort has always been going on and continue to go on forever seems like. We also have taken pricing action to help offset that higher cost we will experience in 2009. On average, our prices increased about 5% to 6%.

When you think about 2009, please remember what Steve mentioned. We told you this year that the second quarter would be our challenging quarter on a year-over-year comparison. Although, we delivered second quarter results that were on plan perhaps the market was surprised by opinion myth according to the consensus.

It is important for you to know that the first quarter of 2009 will be our toughest quarter in the year, when you look at year-over-year input cost and the issues that could have with earnings per share.

As we look ahead to 2009, all calls do not equal quarter-to-quarter. The first quarter underlined... the first quarter will be shifted on quarter-to-quarter comparison. We in fact the second quarter will be the second most challenging in '09. Our plan and our guidance for 2009 takes all of these factors into consideration and we are confident in the range as we are providing today. I just asked you to remember that calls fall differ quarter-to-quarter.

We are pleased that we are in mid-business. Our past experience shows that consumers buy bakery products in good times as well as in troubled economic times. In fact, one local bread and a few other inexpensive food items can make several meals for families. The staff of life, bread, of course, truly does have feed a family when times are tough.

Sales of our branded products are solid, and growing, although there are some movement between channels, food service retail and so far. Our product line and access to market makes us well position to address these changes.

Our teams are focused on having the right products on store sales at the right price. We know the importance of having our local teams apply their expertise to service location with the right mix of products at the right price.

We are flexible to change quickly if consumers change or buying patterns or if customers' needs change. With our proven strategies, our solid business model, our experienced team, our strong brands, and our great quality bake foods we believe we are well positioned to deliver good results for 2008 and to continue building value for the shareholders in 2009 and beyond.

We are excited about the growth opportunities in the West as the Holsum team introduces Nature's Own to their markets. We also continued to see good growth potential in our expansion markets as well as our core markets.

Our team is focused on further improving our efficiencies. We are executing on proven strategies. We lack the bake food business and we are well positioned to deliver good results going forward as we focus on a growth opportunities.

Now, Steve and I will take questions. Keith, I'll turn it back over to you. But Keith let me ask the first question to myself, if I was seating in audience today. And that has to do with our hedging philosophy. All of us can look back on Monday and so you have a football game, could have been played better on Saturday.

Because you look at hedge and this is a strategy that works so well for the company for many years I would really last four or five years of great execution. I feel good about our positions, sometimes you can look at where the hedges are on and you can say you off too high and you can wait long enough to hit the lows. I personally found out when you wait for lows sometimes you end up having the highs.

So we look at it for the long haul. We've said many times that we do page up to six, nine months even a year if we build that's a good position for us to be in. And thinking about that, we did see the wheat up to $13 category. We did not participate in that, neither did our customers and neither did our consumers this year.

You can see times when wheat could get to 3.50 and I don't predict that. Sometimes we do not participate in the loss, but what we try to do over the long-term is have the right price, the right products for our customers and consumers not only for today but tomorrow and for the future and try to do that right. So, I feel the strategy is not correct and our costs are inline and with the products that we have in place. That's how we can feel confident about giving you the guidance that we gave you today.

So Keith, I will turn it over to you now for further questions.

Question And Answer

Operator

Okay. Thank you. [Operator Instructions]. And our first question comes from Heather Jones with BB&T.

Heather Jones - BB&T Capital Markets

Good morning.

George E. Deese - Chairman, Chief Executive Officer and President

Good morning, Heather.

Heather Jones - BB&T Capital Markets

Very good quarter, congratulations.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you so much.

Heather Jones - BB&T Capital Markets

I have a question one on your hedging. And I'm not going to ask statistics but it's more of a qualitative type question. You said that you have some of your coverage I believe that's what I heard you say, some of your coverage in place for '09. And I was wondering I believe last year that you had almost all of your wheat coverage in place going into the year. Wondering if this is a change in direction or just given the volatility in the market that you saw that it was best to wait before completing your coverage, just wondering what we should expect to the last few months of this year?

George E. Deese - Chairman, Chief Executive Officer and President

Heather, so that's a qualitative question for you.

Heather Jones - BB&T Capital Markets

I said qualitative.

George E. Deese - Chairman, Chief Executive Officer and President

Heather, again, each of your brands on a different side of facts, just to reiterate up like that strategy does where, we are covered parts of '09 that we're not saying specifically on the term of that because of competitive reasons. But, I would say that as say that gives you an indication the first quarter is by far the heaviest. And cost will be the highest for the year. I will say that the back half for the year looks a lot more attractive and when we see an opportunity to back and participate in those hedges of later part of the year, we have in and we will.

Heather Jones - BB&T Capital Markets

Okay. And you said you took pricing out 5% to 6%, just wondering if you could give us a... I thought you were taken some price in August. But I don't know if this you're talking about the same price increase. I'm wondering if you think that's the only price increase you should have to take for '09.

George E. Deese - Chairman, Chief Executive Officer and President

I would say that we announced in August that is effective like October 1st.

Heather Jones - BB&T Capital Markets

Okay.

George E. Deese - Chairman, Chief Executive Officer and President

We always look at year ahead and see what is needed and that's based on client when we do it. We feel that this... if things stay in place like they are today and I feel we do not see further price increases until maybe October next year. But that's not a promise because the facts change and it dictates will do something different we just have to work on that as I give on time. But as we see today, I feel good for the next 12 months.

Heather Jones - BB&T Capital Markets

Okay.

George E. Deese - Chairman, Chief Executive Officer and President

12 months from October end of next October.

Heather Jones - BB&T Capital Markets

Okay. And wondering on your sales guidance increased and also appreciate early look at '09. But are your sales guidance increased for this year, was wondering with same based that you raised it that you didn't see any deceleration and your volume trends during October. But I just wanted to double check if that's how was the case that may that you didn't raise guidance because of early quicker integration of the acquisition. But just wondering October trends how about for you?

George E. Deese - Chairman, Chief Executive Officer and President

I did say in my prepared remarks that we did see a little change over, not significant... not enough to worry about. And we do things based on trend, and we did and I did say that private label was up slightly for the quarter. It was again up slightly in October. I'd say that October was not robust but it's not alarm. I don't see that as alarmed at all.

September, October was usually... September is usually about slowest quite frankly. October is better than September, but I don't see an alarm there at all. Steve, follow-up on t guidance on the sales question one more time.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Yes. If you look at the... I think your question is since we completed the quarter and moved into the fourth quarter, we are seeing any trends that would allow us on volume on our core business and I don't think it is important we say anything that really concern us.

George E. Deese - Chairman, Chief Executive Officer and President

And Heather, I thank you followed up with the question. I think it complied you on the acquisition part of the --

Heather Jones - BB&T Capital Markets

I was just wondering if your sale because you did mention a slight deceleration. So, I was just wondering what the rates and the sales guidance was that -- did that reflect that you are integrating... the integration with the two acquisitions is going smoother. You're getting Nature's Own products into the Southwest quicker than you thought. I was wondering if that's what it says.

George E. Deese - Chairman, Chief Executive Officer and President

Yes, that's very true. The two acquisitions on from a tracking standpoint is ahead of what we thought would be from sales standpoint. That is a true statement.

Heather Jones - BB&T Capital Markets

Okay. Alright I appreciate it. And congratulations again.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you, Heather.

Operator

Thank you. And the next question comes from Diane Geissler of Merrill Lynch.

Diane Geissler - Merrill Lynch

Hi. Good morning.

George E. Deese - Chairman, Chief Executive Officer and President

Good morning.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Good morning.

Diane Geissler - Merrill Lynch

Steve,I think we missed this in your commentary, I think you said that the commodity cost expected to be up now $75 million to $80 million. What was the original expectations there?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

I think we talked about it. We thought it probably equal somewhat the last year. And we said now that we expected to be about 60% of last year, which I think last year we are talking in terms of $120 million or so last year. Now, we're looking to 75 to 80.

Diane Geissler - Merrill Lynch

Alright, perfect. And then I guess --

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Kind of did say lot of them were coming from the first half.

Diane Geissler - Merrill Lynch

And is that just a reflection of how well hedged you were in 2008 that you'll still see cost up year-over-year or is it because now you laid in some hedges for the first part of '09 that are little bit about where market prices are where is that trend?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

We will be that specific. As you know we had a great first quarter last year of year end now first quarter of '08 was simply outstanding and even though we performed well on the marketplace we also had good input and good cost for the first quarter.

Diane Geissler - Merrill Lynch

Okay. Well I guess... I'm hearing your comments about pricing. You don't expect to take more pricing until back half October of next year and I guess if we cost continue to trend down, is there some other components that would pressure you to take price increases again next year?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

No. Commodities tend to trade down, if there is no other obstacles we were not need to look at pricing again profile. But we don't... I'm capturing that statement but we do not know. Things are volatile, got some changes everyday. You see you go through whole month and commodities with change a nickel. And say daily we would see $0.30, $0.50 up and down. So any day or any moment you might see that... something in the world changed that could blow aside the water from going up in garbage. We just can't predict that.

George E. Deese - Chairman, Chief Executive Officer and President

And Diane just as reminder, even though weed or flower the significant part of that are the ingredients, there are some other big components as well as sweaters, they are up projected to up, and that all also a pretty substantial for next year as well.

Diane Geissler - Merrill Lynch

Okay. I'm just to trying to figure out if you're trying to call up something to us other than is on your radars that you had, you're concerned upon your radar screen that you think might actually be going up next year that's really --

George E. Deese - Chairman, Chief Executive Officer and President

We're always up to prevent some LIBOR branches et cetera. That's always expected in our guidance.

Diane Geissler - Merrill Lynch

Okay. And I missed the expansion markets are Wichita and --

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

St. Louis.

Diane Geissler - Merrill Lynch

St. Louis.

George E. Deese - Chairman, Chief Executive Officer and President

Yes, we moved into that... those markets just few weeks ago.

Diane Geissler - Merrill Lynch

Okay. And when you think about your expansion markets, do you tend to think of them in terms of we want to add X million dollars in revenue or we want to add X number of roots. How do you... do you kind of think about how many markets you go into, or if you could provide a little bit of color there that I would appreciate that?

George E. Deese - Chairman, Chief Executive Officer and President

You probably, this has been non-scientific. Really Diane and the real truth is when we've seen an opportunity that presents itself, we do want to expand into our French markets. For French markets are different than they were 10 years ago. And we want to grow our company. We want to expand the Nature's Own and Whitewheat brands. We want to take care of our customers better, be more important to all of our customers. So, we need to expand to that reason.

We've been able to expand our markets and do it cautiously, so that we don't kill the P&L as well and that is proven to work well for our shareholders. And so, we'll continue on that same trend. As opportunities present themselves and based on growing need might be with the customers and our capacity and capacity restraints also had plays a part into this.

Diane Geissler - Merrill Lynch

Okay. And finally it's a market-by-market decision. In other words you see okay there is a pocket here. Let's look at that and try to judge it, how many routs we would need to cover that. It's not necessarily we want to have 1% to 2% revenue growth every year from expansion?

George E. Deese - Chairman, Chief Executive Officer and President

No. But I hope we can keep this 1% going for long time.

Diane Geissler - Merrill Lynch

Okay.

George E. Deese - Chairman, Chief Executive Officer and President

Over and better of all the business. Thank you, Diane.

Diane Geissler - Merrill Lynch

Thank you.

Operator

Thank you. And the next question comes from Eric Katzman from Deutsche Bank.

Eric Katzman - Deutsche Bank

Hey, good morning everybody.

George E. Deese - Chairman, Chief Executive Officer and President

Good morning, Eric.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Good morning.

Eric Katzman - Deutsche Bank

Congratulations. Great quarter. It's frustrating to see the stock down as much as it is. But I guess that's our side of the volatility equations. I guess first question, you've got a lot of your business on scan based trading. So, you see very, very quickly, what's going on at the market. How does potential retailer inventory cutbacks play into the outlook and are you seeing any impact in the bread category and in your business?

George E. Deese - Chairman, Chief Executive Officer and President

On the price DSP business, of course, which is the majority of our business that's a day-to-day business and inventory... we've never had an inventory issue because we won't sale fresh, fresher the better. So, inventory is not a problem on fresh.

Even on the provision side, we have not seen any about the trying to cutback or say we've got too much inventory. We tried to make sure that we've managed that through our information systems and that we keeping just enough on the hand, because we don't like inventory on our side either. And we try to manage that, so I don't... Steve I don't know of any issue or problem.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Yes. Any issues with... on the frozen side where inventory seems to be trending up and they is any that concern area. And again as George said, on the fresh side inventory was scan by shredding remains with the distributor and the company, the risk there. So, we haven't seen any push back from customers about the amount of inventory being in business stores.

Eric Katzman - Deutsche Bank

Okay. That's comforting. Second question has to do with kind of the competitive dynamics and specifically given the credit market conditions, I supposed that some of your more challenge competitors, whether they are private or interstate or something like that are probably having difficulty in terms of whether it's a credit and where they were able to hedge and so to the extent input costs are down, is it your expectation that they could be more aggressive on pricing, given that they probably couldn't hedge in '08?

George E. Deese - Chairman, Chief Executive Officer and President

Eric I couldn't comment on our competition because I don't know. This has always been a competitive market as you know. And we have the visibility into that and we always have and we'll remain competitive. I think Steve mentioned we ought to protect our brands and our units and our volume.

I have said many times though our industry, as you look at the public companies announced, I know margins as compared to most packaged food companies are still in the low quantile of quality earnings. And, I would just think we all got to grow our business and earnings for our shareholders. But I haven't... don't have a clue on what they're doing. I'm trying to stay focused on this business and do all the right things and our team on a daily basis to grow our business and take care of our customers and consumers.

Eric Katzman - Deutsche Bank

Okay. Last question and then I will pass it on. I haven't asked this one in a while, but what is the health of your DSD entrepreneurs? What are their financial kind of situation like I mean you have the advantage of having a low cost, go-to market strategy, but on the other hand, I guess to a certain extent dependent upon those DSD operators as being healthy in terms of their results. And their lifestyle et cetera. Do you have a view into that and how do you kind of account for that in your outlook?

George E. Deese - Chairman, Chief Executive Officer and President

Eric, I am happy to say, as I look at it... in fact because of the whole fuel issue over the past 18 months or so, we've been very cognizant of keeping an eye on what our margins are for our distributors and lignite the gasoline effect and all of that. And based on all the insight I can see because obviously all the growth we've had, their margins are based off different product categories and there is work very successfully and my view is we're doing better than ever. And, now with the fuel coming down I think it's even better for us.

Eric Katzman - Deutsche Bank

Okay.

George E. Deese - Chairman, Chief Executive Officer and President

DoesI glow fest for long time I think the program is working very well.

Eric Katzman - Deutsche Bank

Okay. See you in December. Thank you.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you, Eric.

Operator

Thank you. And the next question comes from Tim Ramey of D. A. Davidson.

Timothy Ramey - D. A. Davidson & Co.

Good morning. Congratulations.

George E. Deese - Chairman, Chief Executive Officer and President

Hi Tim. Good morning.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Good morning.

Timothy Ramey - D. A. Davidson & Co.

Just I would echo everything you said about Monday morning's quarter backing and nobody understand it better. But there is always a but, I assume if you just looked at that market basket of commodities right now that they would be down significantly, looking at energy grains, sweeteners, edible oil and so on. And you are very aligned with a largest value retailer own 20% of your sales go to Wal-Mart. What makes you confident that you can hold prices in that environment, that's a bold statement I think?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

I am not trying to bold. I am just trying to be honest and confident in our brands and our execution in the marketplace. We've not seen with our present pricing which did go in October. I guess that's what I can be confident today, now can that change in the future? It always can. But so far so good and we just have stick to that. The facts change, we'll have to change our game plans up.

Timothy Ramey - D. A. Davidson & Co.

And just one other question on share repurchase. Some of your other competitors have theoretically backed away from their share repurchase. Fairly yesterday said, they put theirs on hold. Kellogg I think is backed away a little bit. Do you view this as just as attractive a time as any or are you trying to be a little closer to divest particularly with the new bank notes out there?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

I would say Tim that we continue to or... we have always bought optimistically. We never had plans by so I was saying that would still be our strategy going forward. But as we have taken our leverage, we'll also be focused on allocating debt repayments so. And there will be a balancing as to how we allocate the cash. But I have not seen any indication that we would suspend our program or at this time.

Timothy Ramey - D. A. Davidson & Co.

Okay. Good to hear. Thank you.

George E. Deese - Chairman, Chief Executive Officer and President

Thanks Tim.

Operator

Thank you. The next question comes from Mitchell Pinheiro of Janney Montgomery Scott.

Mitch Pinheiro - Janney Montgomery Scott LLC

Yes, hello, good morning.

George E. Deese - Chairman, Chief Executive Officer and President

Good morning, Mitch.

Mitch Pinheiro - Janney Montgomery Scott LLC

Got on the call little late, so please bear with me here. The Holsum is now making Nature's Own, the two to Tucson and Phoenix bakeries. How many routes is Nature's Own on and were there any costs associated with getting that production up and running out there, any costs in this third quarter?

George E. Deese - Chairman, Chief Executive Officer and President

You would have your normal testing process that you go through. But it wouldn't be a big number; anything would be something which should talk about our side of the fact. We do a lot of testing and sampling the market and going our key accounts for product. You do those type of things but elect to be on in any new product introduction. But we are so pleased with the quality that these two plants are producing. They always do a great job on quality. I'm just thankful that they are doing great job with Nature's Own.

Mitch Pinheiro - Janney Montgomery Scott LLC

So, there will be another routes as well?

George E. Deese - Chairman, Chief Executive Officer and President

Yes. I would say that Arizona and Las Vegas and so the Nevada was first and Southern California is now coming on stream.

Mitch Pinheiro - Janney Montgomery Scott LLC

Okay. Breakfast bread, the Nature's Own breakfast breads, how big of a contribution they have in this quarter? I know you weren't fully distributed in the second quarter and with Wal-Mart taking on more of that product, it seems like that would have an impact?

George E. Deese - Chairman, Chief Executive Officer and President

Mitch, we might have to answer that offline. I'm not sure if we got that. I don't have it on top of mind. I just don't have the number available. We're pleased I got come back the strategy of having this breakfast breads, muffins, bagels under the Nature's Own brand I think is certainly in good pause. We have had growth. We do have a major competitor which has a great job. And we might just have to give that number offline if you don't mind.

Mitch Pinheiro - Janney Montgomery Scott LLC

Yes, don't mind. As far as the space you're getting for breakfast breads, is it incremental or taking away some states from existing Nature's Own or other branded product?

George E. Deese - Chairman, Chief Executive Officer and President

That's same both. You always have a strategy of going into the retail and trying to get new space that's always what you want. And lot of times that happens. But some of the times, they will say you've got three or four SKUs, that's not doing what it should be, why don't you put the new product in that space.

Mitch Pinheiro - Janney Montgomery Scott LLC

Right.

George E. Deese - Chairman, Chief Executive Officer and President

So, we've had some of both. So let's overall, we've had some success on gaining these space.

Mitch Pinheiro - Janney Montgomery Scott LLC

From a margin perspective, did the breakfast breads have higher average or lower margins than your regular Nature's Own line?

George E. Deese - Chairman, Chief Executive Officer and President

Well let's quarter-by-quarter, margins will get better as already in new product in a new brand, you always suffer some extra returns. And that comes out of margin of course. So, over time as we gain share and learn the quest or the merchandising properly sales will come down. But in quarter-by-quarter I think we see those margins improve.

Mitch Pinheiro - Janney Montgomery Scott LLC

Okay. Well, my understanding Thomas' margins are off the chart strong and I would suspect that and then no one is really been able to knock them off. They've maintained a very strong market share, even though other red companies have tried English muffin in those types of products. I don't think anybody has tried with the Nature's Own brand, with the strength of the Nature's Own brand. So, it would seem like there is some market share to be gained there and also with high margins. Is that fair?

George E. Deese - Chairman, Chief Executive Officer and President

Yes. Thank you as I commented. We've got strong competitor and we think that Nature's Own brand will help us in that as a good market.

Mitch Pinheiro - Janney Montgomery Scott LLC

Okay. And, again I saw you missed, but you said Wichita, St. Louis are new expansion markets. How are they... where are they going to be sourcing their product from? Which bakeries?

George E. Deese - Chairman, Chief Executive Officer and President

Okay. Out of our Arkansas operation at this point.

Mitch Pinheiro - Janney Montgomery Scott LLC

And were there any hurricane, costs for self benefit in the quarter?

George E. Deese - Chairman, Chief Executive Officer and President

Mitch I did make a point early on that, we did have the three hurricanes. We did have some extends. But fortunately, and each ones deferred. But this particular quarter we were able to because of the added volume that we... our sales teams managed to give product from our other bakeries around those club and plants were closed. And we took them market, I think beautifully. We did sell a net product of all set. The loss resource, we came at least even. When you come at even, you'll be happy.

Mitch Pinheiro - Janney Montgomery Scott LLC

Okay. And then the last question was when it comes to, I guess how you look at pricing in both. And this is both in the retail side and on the food service side. When it comes to food service in particular, you're the largest player in your markets and arguably one with maybe the highest service levels to potentially the highest service levels. Is there... is that part of the equation when it comes to pricing and why Flowers is able to maintain those levels or is it strictly... is that always bit out and lowest cost wins?

George E. Deese - Chairman, Chief Executive Officer and President

Where we're pleased about future of this business. Steve had mentioned that seemed like the market is improving a little on the food service side. As you know, we do have a great relationship by customers and in that we keep them informed on our cost, what's going on. And we talk to them about some of our hedging strategies and work together. So, when we do need processing for the obvious reasons, most of them is not a battle because people do believe our company and a trust factor.

So, we are able to get a pricing on as needed basis, when the commodities do go up. And I... Mitch on the call earlier, what I did say was our customers not consumers participated on the high end of the commodity cost. Sometime neither will they participate in the very lowest cost. We tried to look at it over the six months, the 12 month horizon and how fair input cost and is fair cost to our customers and consumers and trying to get a fair return. And we just have to manage it that way.

Mitch Pinheiro - Janney Montgomery Scott LLC

Okay. Thank you very much.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you Mitch.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Thanks Mitch.

Operator

Thank you. And the next question comes from Farha Aslam with Stephens Inc.

Farha Aslam - Stephens Inc

Hi, good morning.

George E. Deese - Chairman, Chief Executive Officer and President

Hi Farha.

Farha Aslam - Stephens Inc

Couple of questions, first could you tell us how California expansion is going?

George E. Deese - Chairman, Chief Executive Officer and President

Yeah, we're pleased back to -- we're certainly pleased with the acquisition. The strategy is working right on what we thought it would be. As we said on the last analyst call that the prior ownership had moved into the California market as one of the competitors basically moved out. And you've really got to look at it what can we provide that maybe some of those bakers are and we believe so much in our model of going to market through our independent distributors, along great brands and Nature's Own and Whitewheat and overall good programs. So Southern California is not going to be a huge factor for us in the immediate future. We will grow steadily we trust and that's what we are seeing as we've gone there and that would be introduced more products to the marketplace. It's just going to take time.

Farha Aslam - Stephens Inc

And then you had mentioned about $120 million in cost for this year, that was specifically ingredient cost or I thought it was my understanding that your total costs this year are closer to $150 million to $160 million when you consider packaging and labor?

George E. Deese - Chairman, Chief Executive Officer and President

Steve would you like to answer.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

I think originally back on the second quarter call, we had given indication of the magnitude of our cost increases and we had said on the input cost it would be similar and that's what the $120 million came from. But we modified that today to say we are looking at $75 million to $76 million of input cost for the year. So we had guided down on the input cost. That does not include total cost. That would just be our ingredient packaging of natural gas.

Farha Aslam - Stephens Inc

So that's ingredients packaging, natural...

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Natural gas.

Farha Aslam - Stephens Inc

Okay, those were my key questions, thank you very much.

Operator

Thank you and we have a follow up question from Eric Katzman of Deutsche Bank.

Eric Katzman - Deutsche Bank

I guess my question has to do with your working capital change, Steve could you go through that in a little bit more detail and I think you also mentioned something about margin calls, can you kind of be a little bit more specific on that?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Well, if you look at the change on working capital for the quarter it was negative and that's primarily the result of our hedging activity area. If the markets are one level and your hedge is at a different level sometimes you have to go ahead and burn the cash up front. And as we talk about our first half next year, it is obvious that we are probably funding some of that at this point. And as the hedges roll in to be used or they roll into the period of actual use then net cash over time will come back in theoretically and it all washes itself out. So really the negative effect on the working capital for the quarter is primarily due to the margin on the hedges.

Eric Katzman - Deutsche Bank

So, looking at the full year '08, do you -- I guess you got some acquisition impact which will probably be something of a negative to working capital but will that be a significant use of cash for the year for neutral to get help there?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

It's really hard to say because it moves with the market daily. So, we are not trying to predict the commodities market. So as that fluctuates daily and as it fluctuates, when the cash goes our or cash comes in so, I would say it would be, it must really be a unfair to try to predict that.

Eric Katzman - Deutsche Bank

Thanks.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

It's all related to the market.

Eric Katzman - Deutsche Bank

Okay. Alright, thank you.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you.

Operator

Thank you. [Operator Instructions]. Okay we've a question from David Leibowitz of Horizon Asset Managements.

David Leibowitz - Horizon Asset Managements

Good morning.

George E. Deese - Chairman, Chief Executive Officer and President

Good morning David.

David Leibowitz - Horizon Asset Managements

Briefly, the guidance on profit margins the next year, what would be the prime contributor to having the margins shrink and you told us all the things to could go wrong but if we would try to prioritize which one might be the triggering factor, which would you suspect it might be?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

Dave, that's hard to say. I would say since... we don't have all input cost like that of 100% that could go some either way. There have been questions about pricing on the phone today, how that really turns out. How pricing is in and it's all projected out. I do have to feature more. There's a lot of variables, we feel good about that range. Obviously you see where we are for the year and we'll project and again basically keeping that margin and hopefully even growing it slightly.

David Leibowitz - Horizon Asset Managements

Okay. And the second question, what percentage of your new markets are now being served with your full arsenal of product? In other words, we have the two acquisitions move into the two new territories, what percentage of your potential customers are now stocking the basic Flower's line?

George E. Deese - Chairman, Chief Executive Officer and President

David, I would say in principal all of our new territories depending on when you went in and you remember that's a rolling equation. I would say Northern Virginia that's one of our first, certainly has a full array of Flowers products. Wichita which is only 4, 5 weeks would be somewhat limited and you do it over the probably first six months that you will have... it would take you the full array of products in.

Looking at the merger of Wholesome, they had their own strong product line. And what we are doing to supplement that product line with our number one, and number one brand of soft variety of bread of Nature. So that just is on most of their territory now itself, California and that will Southern California, San Diego specifically will begin to have Flowers products. But again we will not have the full array of Flowers products in Phoenix. When you say the full array, they already had their own white bread brand or certain food service type products. So everything will be available to them, they already had a lot of those products under their own brand.

David Leibowitz - Horizon Asset Managements

Okay. And the last thing, when you open a new territory and then start introducing the Flowers brands, are your profit margins as good as you get in the established arena or is it more a matter of gearing up and taking 18, 24, 36 whatever it might be to reach the established margins?

George E. Deese - Chairman, Chief Executive Officer and President

Dave, I will let Steve follow up on it from a financial view point but what I would say is anytime you move into a new market, new products which the market may not know your brands, your most unsuccessful in getting space but the consumers aren't always picking it up immediately. So you have got that growth period, so you have heavier cost upfront which does limit the profit margins some. So, what we are seeing overtime year to eighteen months or so, no more than twenty four months, those new territories are on par with the rest of our margin throughout the company. Steve is that fair?

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

I would say David, in addition to having to feature to attract the consumer you are also layering in additional distribution cost and typically in a new market those may as well be operated by the company until we can establish a sales base and that sometimes going to be more and that's more expensive for the company at that point because you are having less volume until you build a right average there. So --

David Leibowitz - Horizon Asset Managements

Thank you both.

R. Steve Kinsey - Executive Vice President and Chief Financial Officer

So that does effect the margins.

David Leibowitz - Horizon Asset Managements

Okay. Thank you very much.

George E. Deese - Chairman, Chief Executive Officer and President

Thank you David.

Operator

Thank you and the next question comes from John Emerich of Iron Works Capital.

John Emerich - Iron Works Capital

Thanks. Can you update us as to the performance of the retention assets kind of year-to-date number one and number two, what you have assumed about pension expense or income for next year in your guidance for '09?

George E. Deese - Chairman, Chief Executive Officer and President

Sure John. Looking at the obviously all the markets have been hit. Our plans are no exception. If you look at what we're projecting for 2008, typically you lag in the year when you look at expense on a pension. We're projecting roughly $7 million of pension income because we did freeze our plan about five years ago and looking at the 2009 as of this week we're projecting roughly $2.5 million. So it's a pretty substantial hit and it still remains to be seen as to where the firms end up the year. So, I don't anticipate that will improve any and still some possibility that that could drop. But in our plan and guidance, we have roughly $2.5 million for next year pension income.

John Emerich - Iron Works Capital

Your evaluation date is December?

George E. Deese - Chairman, Chief Executive Officer and President

December 30.

John Emerich - Iron Works Capital

30, I guess it's as of right now or total month end is your 34 million over funded end of '07, are you still over funded?

George E. Deese - Chairman, Chief Executive Officer and President

Our funded status is still pretty healthy and we are still projecting to be working around that 100% slightly over for the year.

John Emerich - Iron Works Capital

Okay, great. Thank you.

George E. Deese - Chairman, Chief Executive Officer and President

Thanks sir.

Operator

Thank you. There are no additional questions at the present time. Do you have any closing comments?

George E. Deese - Chairman, Chief Executive Officer and President

I would thank you for hosting the call today. As I said earlier we're fortunate to be in the food business, we're fortunate that our products are fresh bakery foods as consumer stable. We are fortunate that our strategies work and I would like to stop this moment to thank our entire Flower Foods team for delivering good results in third quarter and for all their continued efforts to improve our business. Thank you all for joining today. See you in December.

Operator

Thank you. This concludes today's teleconference. You may now disconnect your phone lines. Thank you for your participation. .

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Source: Flowers Foods Inc. Q3 2008 Earnings Call Transcript
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