Barclays Conference 2020 - Flowers Foods

Barclays Global Consumer Staples ConferenceSeptember 9, 2020

2

Regarding Forward-Looking StatementsStatements contained in this presentation that are not historical facts are forward-looking statements. Forward-looking statements relate to current expectations regarding our future financial condition, performance and results of operations and the ultimate impact of the novel strain of coronavirus (COVID-19) pandemic on our business, results of operations and financial condition, planned capital expenditures, long-term objectives of management, supply and demand, pricing trends and market forces, and integration plans and expected benefits of transactions and are often identified by the use of words and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "would," "is likely to," "is expected to" or "will continue," or the negative of these terms or other comparable terminology. 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) the ultimate impact of the COVID-19 pandemic and measures taken in response thereto, including, among other things, temporary or ongoing bakery closures, on our business, results of operations and financial condition, which are highly uncertain and are difficult to predict, (b) general economic and business conditions and the competitive conditions in the baked foods industry, including promotional and price competition, (c) changes in consumer demand for our products, including changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store-branded products, (d) the success of productivity improvements and new product introductions, (e) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer's business, (f) fluctuations in commodity pricing, (g) energy and raw material costs and availability and hedging and counterparty risk, (h) our ability to fully integrate recent acquisitions into our business, (i) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value, (j) our ability to successfully implement our business strategies, including those strategies the company has initiated under Project Centennial, which may involve, among other things, the integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values, the deployment of new systems and technology and an enhanced organizational structure, (k) consolidation within the baking industry and related industries, (l) disruptions in our direct-store delivery system, including litigation or an adverse ruling from a court or regulatory or government body that could affect the independent contractor classification of our independent distributors, (m) increasing legal complexity and legal proceedings that we are or may become subject to, (n) product recalls or safety concerns related to our products, and (o) the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems. The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other public disclosures made by the company, including the risk factors included in our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and disclosures made in other filings with the SEC and company press releases, for other factors that may cause actual results to differ materially from those projected by the company. We caution you not to place undue reliance on forward-looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law.

3

Participants

Ryals McMullianPresident & Chief Executive Officer

Steve KinseyChief Financial Officer & Chief Accounting Officer

4

Today’s AgendaStrategic Priorities

Growth Imperatives & Supply Chain Optimization

Driving Brand Relevance

Brand Portfolio Strategy

Acquisition Strategy

Financial Review & Capital Allocation

OVERVIEW

Strategic Priorities







Strong Foundation and Clear Path Forward

6

Leader in Large and Attractive CategoriesOperate the #1 loaf, organic, and gluten-free bread brands; gaining share in stable categories throughout the economic cycle

Leading Brands to Drive GrowthBrand-focused portfolio strategy drives above-market growth via innovation, improved brand presence and relevance, and M&A

Significant Margin Expansion OpportunityPortfolio and supply chain optimization targeting improved price realization, cost containment, and data-driven insights to expand margins

Consistent Capital Allocation Maximizes ReturnsDividend paid in 71 consecutive quarters, opportunistic share repurchases, strong track record of generating value through M&A

Strategic Priorities Aligned to Long-term Growth Targets

7

DEVELOP TEAMCapabilities to build brands and create value

PRIORITIZE MARGINSOptimize portfolio and supply chain

SMART M&AProactive M&A in the grain-based foods arena

FOCUS ON BRANDSEnhance relevancy and expand presence

Enhanced Organizational Structure

8

• Chief Brand Officer responsible for managing the brand portfolio and prioritizing brand-building investments

• Chief Marketing Officer to lead stand-alone innovation function

• Recently named Chief Supply Chain Officer to bring fresh perspective to network and portfolio optimization initiatives

• President of Cake Operations focused exclusively on improving performance in that business

• Foodservice refocused to maximize value over volume and prioritize a more profitable product mix

Better prioritizing brand building, cake turnaround, and food service profitability

Growing Sales with Iconic Brands

9

• Build brands through insights, innovation, and marketing

• Capitalize on portfolio opportunities

FLOWERS’ BRANDED PRODUCTS DRIVING TOP LINE

CAGR 5.7%

$2.2B

$1.6B

$2.7B

$1.6B

Branded Sales Non-branded Sales

FY - 15

LTM - 20 ¹

CAGR 5.3%

(1) 52 weeks ended Q2 2020(2) Internal Sales Data Warehouse 52 Weeks Ending July 11, 2020

1418

Flowers' Share ²

Portfolio Strategy Drives Margins

10

Branded Retail

$2.718B

Store Branded

Retail

$627M

Non-Retail & Other

$915M

Recent results demonstrate impact of shift to branded retail

SALES MIX1

• Clarified brand strategy to drive margin expansion

• Prioritizing a more profitable product mix

• Repurposing capacity to grow branded retail business

(1) 52 weeks ended Q2 2020

Total sales up 5.3% y/y; branded retail up 12.5% y/y

Prioritizing Margins with Supply Chain Optimization

11

DISTRIBUTION AND NETWORK

BAKERY OPERATIONS PROCUREMENT

OVERHEAD EXPENSES

• Backhaul utilization

• Cube optimization

• Depot consolidation

• Optimize number of bakeries

• Limit overtime expense

• Transition some routes to four-day delivery

• Repurpose Lynchburg bakery

• SKU rationalization

• Increase production run times

• Quality improvement; site line machines

• Stale reduction

• Optimize days of availability

• Minimize scrap

• Automation

• Leverage scale with centralized buying

• Direct materials savings

• Buy better, more strategically

• Leased labor

• Packaging

• Ingredients

• Staffing optimization

• Testing and implementing maintenance and measurement processes

• Enhanced hiring procedures

Reducing fixed costs, enhancing operating leverage

Smart M&A

12

• Pursuing disciplined and highly strategic M&A

• Seeking out innovative platform brands in grain-based foods beyond fresh packaged bread

• Accelerating geographic expansion of growth and core brands

IRI Flowers custom data base Total US MultiOutlet – 52 weeks ended 19-Apr-2020

Track record of strategic growth investments

Fresh Packaged

Breads $15B

Other Grain-Based

Categories $53B

$68B GRAIN-BASED FOOD UNIVERSE

Long-termGrowth Targets1

Strategic Priorities Drive Long-term Growth

13

DEVELOP TEAM

PRIORITIZE MARGINS SMART M&A

FOCUS ON BRANDS

+1-2%SALES

+4-6%ADJ. EBITDA2

+7-9%ADJ. EPS3

(1) Sales and adjusted EBITDA targets reflect organic business growth; adjusted EPS target includes the potential impact of future M&A and share repurchases.(2) Earnings before interest, taxes, depreciation & amortization (EBITDA), adjusted for matters affecting comparability. See non-GAAP disclosure at the end of this slide presentation for a discussion of

these forward-looking, long-term targets.(3) Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP disclosure at the end of this slide presentation for a discussion of these forward-looking, long-term targets.

15

Potential of optimized portfolio, supply chain

Organization is aligned around the fundamentals

of building brands

Portfolio strategy informs supply chain optimization

initiatives

Key Takeaways

Q2 Illustrates Potential of Optimized Portfolio, Supply Chain

67%14%

19%

Significant margin increase as branded retail business grew to a larger percentage of sales

Combining right portfolio mix with improved bakery network enhances margins

Accelerating optimization to deliver margin expansion over time

Strong Q2 results show effect initiatives could have on our longer-term results SALES MIX

60%17%

23%Branded Retail

Store-branded Retail

Non-retail & Other

Q2 2020 Q2 2019Q2 2019 ADJUSTED EBITDA MARGIN1

10.8%Q2 2020 ADJUSTED EBITDA MARGIN1

12.5%

16(1) Earnings before interest, taxes, depreciation & amortization, adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

Executing Against Operational Priorities

17

FOCUS ON BRANDSEnhance relevancy and expand presence

• Marketing team focused on targeted innovation and marketing to generate awareness, drive trial and repeat

• Brand team executing a portfolio strategy designed to opportunistically grow share

TARGET SALES GROWTH = 1-2%

PRIORITIZE MARGINSOptimize portfolio and supply chain

• Portfolio strategy underpins supply chain optimization initiatives

• Orienting asset base to higher margin products, reducing network complexity, enhancing product profitability

TARGET ADJ. EBITDA1 GROWTH = 4-6%

(1) Earnings before interest, taxes, depreciation & amortization, adjusted for matters affecting comparability. See non-GAAP disclosures at the end of this slide presentation for a discussion of these forward-looking, long-term targets.

Leveraging Flexibility

18

DEPOT MARKETPLACE

Branded retail Foodservice

Flexible fixed asset base can produce and distribute product for any market

IDPBAKERY

HOW WE GO TO MARKET

VERSATILITY TO MEET CHANGING DEMAND

Store branded retail

Optimizing Network to Prioritize Margins

19

Portfolio strategy determines targeted brands and segments• Pivot capacity to most powerful brands

• Maximize revenue and margin potential

Optimize and reallocate capacity to increase network utilization• Closed three bakeries since start of Project Centennial

• Transitioned volume to more-efficient lines

Repurposed two bakeries to meet growing DKB demand• Tuscaloosa, AL and Lynchburg, VA converted to organic production

• Lynchburg bakery expected to open in September 2020

Network Consolidation

20

Lower cost to serve market

Fewer transport miles

Additional network capacity

BENEFITS

BAKERY

DEPOT

MARKET

PREVIOUS TODAY

Increasing Product Profitability

21

• SKU rationalization

• Improved ordering

• Lowering costs and increasing realized capacity

Realized~130 hours per weekin additional capacity, equivalent to an additional bakery

STALE REDUCTION

Shifting Mix to Enhance Profitability

22

Resulting inhigher mix of branded retail products and more profitable mix of store branded and foodservice business

Be more selective about type and quality of other business we accept

Reduce percentage of store branded and foodservice products: Allows us to negotiate better pricing terms on the business we keep….

Increasing production of branded retail means we can….

&

Key Takeaways

24

Attractive category with high

penetration and frequency

Relevance ensures our brands

resonate with consumers

Foundational consumer research informs

marketing and innovation strategy

Digital capabilities / digital shelf

RELEVANCE PRESENCE GROWTH

Fundamentals Stand Out Among Grocery Categories

25

11.2

11.4

11.6

11.8

12.0

12.2

12.4

-

20.0

40.0

60.0

80.0

100.0

7/16/17 11/5/17 2/25/18 6/17/18 10/7/18 1/27/19 5/19/19 9/8/19 12/29/19

% HH Buying Purchase Cycle - Xactions Avg

(1) Willard Bishop SuperStudy 2019(2) Total US: IRI Panel Data 3/1/20, Rolling 13-week periods(3) Total US: IRI Multi Outlet, Quarterly Results

BRANDED CATEGORY SHARE3

$1.38

$2.91

$5.26 $5.87

$-

$2.0

$4.0

$6.0

StoreBrand

Nature'sOwn

DKB Canyon

• Large, stable category with sales of $24B+

• Present in 98% of households; buy the category every 12 days

• Consumers willing to pay premium for brands

• Most profitable category for retailers1

TOTAL US BREAD CATEGORY HOUSEHOLD PENETRATION & PURCHASE CYCLE FREQUENCY (DAYS)2

ATTRACTIVE BRAND ECONOMICS

75.3% 75.6%76.3%

79.9%

2Q17 2Q18 2Q19 2Q20

Creating Brand Relevance

26

ANNUALIZED OPPORTUNITY

>$350MRelevance

• Generate awareness

• Drive trial

• Convert to repeat

• Disrupt via innovation

Repeat (loyalists)

Trial

Aided and Unaided Awareness

Brand Positioning & Messaging

Targeting brand benefits to meet consumer desires

Delivering advertising via media mix to create awareness

Converting awareness to trial and repeat

Consumer Insight-Driven Messaging to Create Brand Relevance

27

INSPIRINGCHILDLIKE WONDER

BAKING HAPPY AND HEALTHY

INTO EVERY HOME

Developing relevant brand positioning through a deep understanding of consumers’ minds and needs

Messaging reflects the consumers’ desire for functional and emotional benefits

Consumer Messaging

Brand StrategyReaching the consumer though relevance

Brand ArchitectureVision, positioning, personality

Foundational ResearchUnlocking the consumers’ minds and needs

Focus on Consumer Needs

28

At the intersection of each Consumer Segment and Need State:

• Defining the size of the opportunity and the brand’s share of occasions.

• Assessing the fit of every brand for the need and balancing the portfolio approach

Size

ShareFit

Portfolio

ACTIVEINFLUENCERS

BUSYBUDGETERS

BREADAVOIDERS

HEALTHESTABLISHED

FUNCTIONALEATERS

TRADITIONAL CONNECTION

HEALTHIER CHOICES

QUICK AND SIMPLE

HUNGERRELIEF

COMFORT AND BONDING

PERSONAL INDULGENCE

BITES OF ADVENTURE

Building Awareness Is Vital

29

0

300

600

900

Audi

o / O

OH

Disp

lay

Prin

t

Shop

per

Soci

al

Spot

Rad

io

Vide

o

YouT

ube

2019 2020

Source: IRI Panel Measures, Total US – 52 Week Ending 3/22/20

DRIVING AWARENESS: MESSAGING AND POSITIONING FOR THE CORE CONSUMER1

AIDED 70%

UNAIDED 15%AIDED 85%


UNAIDED 10%

AIDED 75%


UNAIDED 29%

PEER 1 PEER 2

Impr

essio

ns (m

illio

ns)

Flowers’ Brands Have Strong Upside Opportunity For Growth

30Source: IRI Panel Measures, Total US – 52 Weeks Ending 3/22/20

0

20

40

60

80

100

% Hhld Penetration

020406080

100

% Repeaters

0

10

20

30

40

50

Purchase Cycle (Days)

Driving growth through brand relevance

• Increase household penetration

• Increase consumer loyalty (% repeat)

• Drive consumption (lower # of days in purchase cycle)

0

50

100

% Hhld Penetration

NATURE’S OWN PENETRATION

Total US31.9%

South Region52.8%

DRIVE HOUSEHOLD PENETRATION FOR FLO BRANDS

DRIVE HIGHER CONSUMPTION(REDUCE PURCHASE CYCLE)

INCREASE LOYALTY RATE SOUTHERN IRI REGION: PENETRATION FLO BRANDSBread Category

Nature’s Own

Wonder

Dave’s Killer Bread

Peer 1

Peer 2

Engaging the Changing Consumer with E-Commerce

31(1) IRI E-Commerce and Instacart data(2) IRI Period 2, 2020

4.4%

6.2%

12.5%

0%

5%

10%

15%

2Q’19 2Q’20Pre-Covid ‘202

E-COMMERCE AS % OF BREAD OMNICHANNEL SALES1

• Forced adoption of e-commerce due to COVID-19 driving large shift in retail channel

• Expect increased trial to drive meaningful growth in enduring users

• E-commerce benefits strong brands as awareness and search are key elements of online shopping

• Developing new capabilities in Marketing and Sales Digitization to leverage shift in consumer habits

Driving to win digital consideration and shelf

Consumer Acquisition and Retention Through Marketing

32

Seizing on consumers’ desires for Freshness

Nature’s Own drives home the Unique Selling Proposition: “Scratch to Shelf in about 48 hours”

Key Takeaways

34

Leverage innovation to create brand presence

in underdeveloped segments

Clarified portfolio strategy

Expand brand presence in underdeveloped geographies

through distribution and penetration

Drive brand presence with our retail partners

in a changing marketplace

RELEVANCE PRESENCE GROWTH

Capitalizing on Recent Trends

35

Increased household penetration and increased consumption are driving category growth

Household penetration for FLO brands up 250 BPS

13.2%

7.9%

14.0%

8.5%

18.2%15.0%

DEPT-GENERAL FOOD FRESH PACKAGED BREADS FLOWERS BREAD

Source: IRI Scan and Panel Data - Flowers Custom Database 12 Weeks Ending 7-12-2020

DOLLAR SALES, % CHANGE VS YA VOLUME SALES, % CHANGE VS YA

92.8

35.5

93.7

38.0

Fresh Packaged Breads Category Flowers Bread

Year Ago Cal. Yr.

% OF HOUSEHOLDS BUYING

PREMIUM GROWTH BRANDS

Drive premiumization of category

MAINSTREAM BRANDS

Drive premium end of mainstream consumption

Drive value end of mainstream consumption

STRONG REGIONAL BRANDS

Win locally with strong regional brands

Driving Brand Presence with a Clear Portfolio Strategy

36

Clarified roles for our brands, channels, and categories• Expand premium growth

brands, win with mainstream brands, and compete locally with strong regional brands

• Align growth maps and brand strategies with network optimization plans

• Rationalizing brands and SKUs

Expanding Brand Presence Geographically

37

Under-developed markets offer huge growth potential• Focused approach

• Expand breadth and depth of distribution

• Drive awareness, trial, and repeat with increased advertising and shopper marketing

• Intense focus by our DSD sales organization and IDPs

(1) IRI MULO, Calendar Year 2019

FLOWERS DOLLAR SHARE OF FRESH PACKAGED BREAD CATEGORY1

Capitalizing on brand growth potential by increasing presence

27.9 – 49.7

17.1 – 27.8

9.5 – 17.0

5.8 – 9.4

0.0 – 5.8

Leveraging Innovation to Create Presence in Adjacent Segments

38

Consumers expect our brands to offer solutions beyond loaf 26.7

9.9

2.9

30.4

10.77.1

LOAF SANDWICH BUNS/ROLLS BREAKFAST ITEMS

TTM, 3 Years Ago TTM

LOAF SANDWICH BUNS/ROLLS BREAKFAST ITEMS

Segment Size (Annual) $7.7 B $3.5 B $2.2 B

Flowers 3 Year $ Sales CAGR + 6.6% + 2.8% + 62.5%

(1) IRI Scan Data - Flowers Custom Database 12 Weeks Ending 7-12-2020, 52 Weeks Ending 7-12-2020 for annual numbers

FLOWERS DOLLAR SHARE1

Driving Brand Presence with Retail Partners

39

• Consumer-relevant brands appeal to a broad range of consumer demographics

• Brand portfolio delivers incremental category sales and margin growth

• Provide best-in-class category leadership as we navigate uncertain times

(1) IRI Panel Data Total US Category % Share of Requirements, 52 WE 7/12/2020. Peers are leading competitive national bread brands

BRAND LOYALTY - % OF BUYER CATEGORY DOLLARS SPENT WITHIN BRAND1

18.3

8.2

21.025.5

15.0 14.3 15.812.3

Nature's Own Wonder Dave's Killer Bread Canyon Bakehouse Peer 1 Peer 2 Peer 3 Peer 4

Key Takeaways

41

Partner with innovation team to identify

opportunities

Positioned for growth with strong free cash

flow, balance sheet, and M&A track record

Structured approach drives

repeatable process

Explore opportunities in core and grain-based adjacencies

Positioned for Growth Through M&A

42

$90

$570

$-

$10 0

$20 0

$30 0

$40 0

$50 0

$60 0

TTM-Q2'15 TTM-Q2'20

$26

$64

$-

$10

$20

$30

$40

$50

$60

$70

TTM-Q2'18 TTM-Q2'20

#1 Gluten-free Loaf

Proven track record of acquiring and growing differentiated bakery brands

Strong balance sheet and cash flow generation enable investment in further growth

DAVE'S KILLER BREAD TRACKED RETAIL SALES ($M)

CANYON BAKEHOUSE TRACKED RETAIL SALES ($M)

#1 Organic Loaf

5YR CAGR

+45%

2YR CAGR

+58%

Source: IRI Scan Data - Flowers Custom Database

Structured Approach to M&A

43

Clearly defined, repeatable process Link between corporate

development, strategy, and innovation

Explicit strategic criteria

Steady stream of opportunities

M&A is a capability

Integration is crucial

Monitoring and post-mortems

Deep industry relationships

44

Role of Smart M&A

Partner with innovation team to identify opportunities beyond our core

SOLIDIFY THE CORE• Infrastructure and

distribution growth in underdeveloped markets

• Leverage existing brands

INNOVATIVE ADJACENCIES• Gain exposure to growing,

underdeveloped segments and innovative brands

• Focus on platform assets that bring new capabilities

GEOGRAPHIC EXPANSION• Fill in existing markets

• Expand into newer markets

ALTERNATIVE DEAL STRUCTURES• Joint ventures

• Minority investments

• Strategic partnerships

Key Takeaways

46

Solid Q2 results, positive 2020

outlook

Strong free cash flow, consistent

capital allocation

Long-term targets supported by leading

brands and growth strategy

Growth roadmap highlights long-

term opportunity

Q2 2020 Financial Highlights

47

$106 $129

$0

$20

$40

$60

$80

$10 0

$12 0

$14 0

Q2'19 Q2'20

12.5%Margin10.8%

Margin

+21%

GROWTH

+5.1%

GROWTH

COMPONENTS OF Q2’20 SALES GROWTH (MILLIONS) ADJUSTED EBITDA (MILLIONS)1

• Sales increase reflecting the continued impact of the COVID-19 pandemic

• Mix shift to branded retail products drove cost leverage and margin increase

(1) Earnings before interest, taxes, depreciation & amortization, adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

NET SALES$1.026B +5.1% v PY• Price/Mix +8.4%; Volume -3.3%

• Growth from branded retail more than offsetting lower store-branded retail and foodservice sales

Q2 2020 Financial Review

48

ADJ. EBITDA1

$128.5M +21.4% v PY• 12.5% of sales, up 170 bps

• Increased primarily due to improved product mix, partially offset by higher employee incentive costs and IDP fees on lower transportation costs

CASH FLOWS - YTDDividends$82.6M

Cash from Ops$275.8MCapex$46.6M

GAAP DILUTED EPS$0.27 +$0.02 v PY

ADJ. DILUTED EPS2

$0.33 +$0.08 v PYIncreased adj. EBITDA partially offset by higher tax rate

(1) Earnings before interest, taxes, depreciation & amortization (EBITDA), adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.(2) Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

Fiscal 2020 Guidance (Updated Aug 6, 2020)

49(1) Week 53 expected to contribute 1.5% of overall sales growth.(2) Adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this presentation.

Fiscal 2020 H2 Considerations• Food at home

consumption remains elevated, not as high as Q1 levels

• Foodservice stabilizing and beginning to recover, still well below normal

• Pace of return-to-work and back-to-school

• Navigating pandemic impact on bakery operations

SALES GROWTH1 ADJ. EPS2

OTHER

+4.0% to +5.0% $1.15 to $1.25

Depreciation & amortization —$145 to $150 million

Net interest expense —$11 million

Effective tax rate —Approx. 24.0% to 24.5%

Diluted shares outstanding —Approx. 212.5 million

Capital expenditures —$85 to $95 million

50

Steady Free Cash Flow

(1) Operating Cash flow minus Capital Expenditures. See non-GAAP reconciliations at the end of this presentation.(2) As of Q2 2020

$245 $255

$222

$196

$263 $332

$-

$50

$10 0

$15 0

$20 0

$25 0

$30 0

FY-15 FY-16 FY-17 FY-18 FY-19 LTM-20

Strong free cash flow growth supports investments in the business, M&A strategy and capital returns

FREE CASH FLOW1 TO FUEL ACCRETIVE INVESTMENTS (MILLIONS)

Cash Flow Drivers• Growing sales

• Focus on cash margins

• Predictable capex

2

Consistent Capital Allocation

51

Capital Allocation Principles:• Capex to support core

business growth

• Maintain investment grade credit rating

• Support strong dividend

• Smart, disciplined acquisitions

• Opportunistic share repurchases

$120 $131 $141 $150 $160 $163

$7 $126 $3 $2 $7 $1

$395

$200

$-

$10 0

$20 0

$30 0

$40 0

$50 0

$60 0

FY-15 FY-16 FY-17 FY-18 FY-19 LTM-20

Dividends Share Repurchases

Cash for Acquisitions

CAPITAL ALLOCATION (MILLIONS)

(1) As of Q2 2020

1

Track Record of De-Leveraging Post-M&A

52(1) Excludes lease liabilities

TOTAL DEBT1 (MILLIONS)Maintaining flexibility to capitalize on value-creating opportunities

$984 $928

$805

$980 $867

FY-15 FY-16 FY-17 FY-18 FY-19

1968 to 2020: MORE THAN 100 ACQUISITIONS

Long Track Record of Growth

53

SALES GROWTH COMPONENTS1 (MILLIONS)

10yr CAGR+5.2%

$-

$5.0 0

$10 .00

$15 .00

$20 .00

$25 .00

Aug'10

Aug'11

Aug'12

Aug'13

Aug'14

Aug'15

Aug'16

Aug'17

Aug'18

Aug'19

Aug'20

TOTAL SHAREHOLDER RETURNS

1. Source: Company filings.2. Total Shareholder Return (TSR) assumes reinvestment of dividends. Source: NASDAQ3. Acquisition category includes sales for 12 months following purchase

10yr TSR2

+11.4%

3

Key Drivers to Achieving our Long-term Growth Targets

54

LONG-TERM GROWTH TARGETS1

+1-2%SALES

+4-6%ADJ. EBITDA2

+7-9%ADJ. EPS3

Focus on leading, iconic brands to grow share

Portfolio strategy prioritizes higher-priced, higher-profit products and customers

Supply chain optimization enhances operating leverage, streamlines fixed cost structure

Strong free cash flow generation provides fuel for accretive M&A, opportunistic share repurchases, and dividends

(1) Sales and adjusted EBITDA targets reflect organic business growth; adjusted EPS target includes the potential impact of future M&A and share repurchases.(2) Earnings before interest, taxes, depreciation & amortization (EBITDA), adjusted for matters affecting comparability. See non-GAAP disclosure at the end of this slide presentation for a

discussion of these forward-looking, long-term targets.(3) Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP disclosure at the end of this slide presentation for a discussion of these forward-looking, long-term targets.

Roadmap to Delivering Long-term Targets

FY2020 FY2021 FY2022• Favorable mix shift

• Accelerate optimization initiatives

• Performance above long-term targets

• 53-week year

• Adjust to the new-normal

• Deliver operational improvements

• Headwinds as consumer behavior normalizes

• 52-week year

• Brands driving above-category sales growth

• Performance in-line with long-term targets

• 52-week year

55

56

OUR VISION HAS NEVER BEEN CLEARERRight structure with a passionate team committed to continued success

Emotional connection of fresh bread offers innovative brands the opportunity to appeal powerfully to consumers

Competitive, leading operator with combination of strong brands and scale

Opportunity to grow through product adjacencies, innovation, and M&A

Information Regarding Non-GAAP Financial Measures

57

The company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). However, from time to time, the company may present in its public statements, press releases and SEC filings, non-GAAP financial measures such as, EBITDA, adjusted EBITDA, adjusted EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted EPS, adjusted income tax expense, adjusted selling, distribution and administrative expenses (SD&A), gross margin excluding depreciation and amortization, free cash flow, and the ratio of net debt to adjusted EBITDA. The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure. The company’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

The company defines EBITDA earnings before interest, taxes, depreciation and amortization. The company defines free cash flow as operating cash flow minus capital expenditures. The company believes that free cash flow provides investors a better understanding of the company’s liquidity position. The company believes that EBITDA is a useful tool for managing the operations of its business and is an indicator of the company's ability to incur and service indebtedness and generate free cash flow. EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation Plan. Furthermore, pursuant to the terms of our credit facility, EBITDA is used to determine the company's compliance with certain financial covenants. The company also believes that EBITDA measures are commonly reported and widely used by investors and other interested parties as measures of a company's operating performance and debt servicing ability because EBITDA measures assist in comparing performance on a consistent basis without regard to depreciation or amortization, which can vary significantly depending upon accounting methods and non-operating factors (such as historical cost). EBITDA is also a widely-accepted financial indicator of a company's ability to incur and service indebtedness.

EBITDA should not be considered an alternative to (a) income from operations or net income (loss) as a measure of operating performance; (b) cash flows provided by operating, investing and financing activities (as determined in accordance with GAAP) as a measure of the company's ability to meet its cash needs; or (c) any other indicator of performance or liquidity that has been determined in accordance with GAAP.

The company defines adjusted EBITDA, adjusted EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted EPS, adjusted income tax expense, adjusted SD&A, respectively, excluding the impact of asset impairment charges, Project Centennial consulting costs, lease terminations and legal settlements, acquisition-related costs, and pension plan settlements. Adjusted income tax expense also excludes the impact of tax reform. The company believes that these measures, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges.

The company defines net debt as total debt less cash and cash equivalents. Net debt to EBITDA is used as a measure of financial leverage employed by the company. The company defines free cash flow as operating cash flow minus capital expenditures. The company believes that free cash flow provides investors a better understanding of the company’s liquidity position. Gross margin excluding depreciation and amortization is used as a performance measure to provide additional transparent information regarding our results of operations on a consolidated and segment basis. Changes in depreciation and amortization are separately discussed and include depreciation and amortization for materials, supplies, labor and other production costs and operating activities.

Presentation of gross margin includes depreciation and amortization in the materials, supplies, labor and other production costs according to GAAP. Our method of presenting gross margin excludes the depreciation and amortization components, as discussed above.

The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure. No reconciliation of the long-term targets for adjusted EBITDA or Adjusted EPS is included in this presentation because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Reconciliation of Non-GAAP Financial Measures

58

For the 12 Week Period

Ended


EndedJuly 11, 2020 July 13, 2019

Net income per diluted common share 0.27$ 0.25$ Restructuring and related impairment charges 0.04 0.01 Project Centennial consulting costs 0.02 - Legal settlements - (0.01) Executive retirement agreement - NMAdjusted net income per diluted common share 0.33$ 0.25$ NM - not meaningful.Certain amounts may not add due to rounding.

Reconciliation of Earnings per Share to Adjusted Earnings per Share

59


For the 12 Week Period Ended


July 11, 2020 July 13, 2019

1,025,861$ 975,759$

506,033 508,552 Gross Margin excluding depreciation and amortization 519,828 467,207 Less depreciation and amortization for production activities 18,113 18,590 Gross Margin 501,715$ 448,617$

Depreciation and amortization for production activities 18,113$ 18,590$

15,067 14,739Total depreciation and amortization 33,180$ 33,329$

(000's omitted)

SalesMaterials, supplies, labor and other production costs (exclusive of depreciation and amortization)

Depreciation and amortization for selling, distribution and administrative activities

Reconciliation of Gross Margin

60



Ended



Selling, distribution and administrative expenses (SD&A) 396,904$ 359,497$ Project Centennial consulting costs (5,584) - Legal (settlements) recovery - 1,286 Executive retirement agreement - 568 Adjusted SD&A 391,320$ 361,351$

Reconciliation of Selling, Distribution and Administrative Expenses to Adjusted SD&A

61



Ended



Net income 57,919$ 53,095$ Income tax expense 18,493 15,951 Interest expense, net 2,869 2,769 Depreciation and amortization 33,180 33,329 EBITDA 112,461 105,144 Other pension cost (72) 519 Restructuring and related impairment charges 10,535 2,047 Project Centennial consulting costs 5,584 - Legal settlements (recovery) - (1,286) Executive retirement agreement - (568) Adjusted EBITDA 128,508$ 105,856$

Sales 1,025,861$ 975,759$ Adjusted EBITDA margin 12.5% 10.8%

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

62




July 11, 2020 July 13, 2019

Income from operations 79,209$ 72,334$ Restructuring and related impairment charges 10,535 2,047 Project Centennial consulting costs 5,584 - Legal (recovery) settlements - (1,286) Executive retirement agreement - (568) Adjusted income from operations 95,328$ 72,527$

Reconciliation of Income from Operations to Adjusted Income from Operations

63




July 11, 2020 July 13, 2019

Income tax expense 18,493$ 15,951$ Tax impact of:

Restructuring and related impairment charges 2,634 517 Project Centennial consulting costs 1,396 - Legal (recovery) settlements - (325) Executive retirement agreement - (143)

Adjusted income tax expense 22,523$ 16,000$

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense

64




July 11, 2020 July 13, 2019

Net income 57,919$ 53,095$ Restructuring and related impairment charges 7,901 1,530 Project Centennial consulting costs 4,188 - Legal (recovery) settlements - (961) Executive retirement agreement - (425) Adjusted net income 70,008$ 53,239$

Reconciliation of Net Income to Adjusted Net Income

65


Net income per diluted common share 0.66$ to 0.76$ Restructuring and related impairment charges 0.04 0.04 Project Centennial consulting costs 0.03 0.03 Legal settlements 0.01 0.01 Pension plan settlement and curtailment loss 0.41 0.41 Other pension plan termination costs NM NMAdjusted net income per diluted common share 1.15$ to 1.25$ Certain amounts may not add due to rounding.

Reconciliation of Earnings per Share - Full Year Fiscal 2020 GuidanceRange Estimate


66

Time Period

Cash Provided by Operating Activities

Purchase of Plant, Property and Equipment Free Cash Flow

2Q20 TTM 434,689$ 102,867$ 331,822$ FY19 366,952 103,685 263,267 FY18 295,893 99,422 196,471 FY17 297,389 75,232 222,157 FY16 356,562 101,727 254,835 FY15 335,674 90,773 244,901

* Cash provided by operating activities less purchase of plant, property and equipment.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow*


67


EndedFor the 12 Week

Period Ended


Ended


Ended

Trailing 52 Week Period

EndedOctober 5, 2019 December 28, 2019 April 18, 2020 July 11, 2020 July 11, 2020

Net income (loss) 43,358$ 2,219$ (5,772)$ 57,919$ 97,724$ Income tax expense (benefit) 12,442 (1,047) (2,019) 18,493 27,869 Interest expense, net 2,334 2,170 3,314 2,869 10,687 Depreciation and amortization 33,196 32,884 44,663 33,180 143,923 EBITDA 91,330 36,226 40,186 112,461 280,203 Other pension cost 518 519 143 (72) 1,108 Project Centennial consulting costs - 784 3,392 5,584 9,760 Restructuring and related impairment charges 3,277 17,482 - 10,535 31,294 Other pension plan termination costs - - 133 - 133 Pension plan settlement and curtailment loss - - 116,207 - 116,207 Legal settlements (recovery) - 29,150 3,220 32,370 Executive retirement agreement - - - - Loss on inferior ingredients - 376 - - 376 Adjusted EBITDA 95,125$ 84,537$ 163,281$ 128,508$ 471,451$

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

68


As ofJuly 11, 2020

Current maturities of long-term debt -$ Long-term debt 1,009,596 Total debt 1,009,596 Less: Cash and cash equivalents 299,562 Net Debt 710,034$

Adjusted EBITDA for the Trailing Twelve Months Ended July 11, 2020 471,451$ Ratio of Net Debt to Trailing Twelve Month Adjusted EBITDA 1.5

Reconciliation of Debt to Net Debt and Calculation of Net Debt to Trailing Twelve Month Adjusted EBITDA Ratio

Barclays Conference 2020 - Flowers Foods

Documents

Transcript of Barclays Conference 2020 - Flowers Foods