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Investor UpdateAugust 7, 2020
WelcomeWelcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Marketing & Innovation Strategy
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer Session
J.T. RieckSenior Vice President, Finance & Investor Relations
3
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.
Strategic Priorities
Welcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer SessionRyals McMullianPresident & Chief Executive Officer
5
Today’s AgendaStrategic PrioritiesRyals McMullian | President & Chief Executive Officer
Growth Imperatives & Supply Chain OptimizationBrad Alexander | Chief Operating Officer
Driving Brand RelevanceDebo Mukherjee | Chief Marketing Officer
Brand Portfolio StrategyMark Courtney | Chief Brand Officer
Acquisition StrategyMark Gerrish | Vice President, Corporate Development
Financial Review & Capital AllocationSteve Kinsey | Chief Financial Officer & Chief Accounting Officer
Question & Answer SessionExecutive Management Team
AGENDA
Flowers Team – Meeting Unprecedented Challenges
6
Q2 2020 Financial Highlights
7
$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.
Strong Foundation and Clear Path Forward
8
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
9
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
10
• Chief Brand Officer responsible for managing the brand portfolio and prioritizing brand-building investments
• Chief Marketing Officer to lead stand-alone innovation function
• 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 foodservice profitability
Growing Sales with Iconic Brands
11
• 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
12
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
13
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
14
• 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
15
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 reconciliations at the end of this slide presentation.(3) Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.
Growth Imperatives & Supply Chain Optimization
Welcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer SessionBradAlexanderChief Operating Officer
17
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%
18(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
19
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 reconciliations at the end of this slide presentation.
Leveraging Flexibility
20
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
21
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
22
Lower cost to serve market
Fewer transport miles
Additional network capacity
BENEFITS
BAKERY
DEPOT
MARKET
PREVIOUS TODAY
Increasing Product Profitability
23
• 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
24
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 …
&
Driving Brand Relevance
Welcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer SessionDeboMukherjeeChief Marketing Officer
Key Takeaways
26
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
27
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
28
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 mixto create awareness
Converting awareness to trial and repeat
Consumer Insight-Driven Messaging to Create Brand Relevance
29
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
30
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
31
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 35%AIDED 29%
UNAIDED 10%
AIDED 75%
UNAIDED 29%AIDED 71%
UNAIDED 29%
PEER 1 PEER 2
Impr
essio
ns (m
illio
ns)
Flowers’ Brands Have Strong Upside Opportunity For Growth
32Source: 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
33(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
34
Seizing on consumers’ desires for Freshness
Nature’s Own drives home the Unique Selling Proposition: “Scratch to Shelf in about 48 hours”
Welcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer SessionMarkCourtneyChief Brand Officer
Brand Portfolio Strategy
Key Takeaways
36
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
37
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
YA CY
% 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
38
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 networkoptimization plans
• Rationalizing brands and SKUs
Expanding Brand Presence Geographically
39
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
40
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
41
• 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
Welcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer SessionMarkGerrishVice President, Corporate Development
Acquisition Strategy
Key Takeaways
43
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
44
$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
45
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
46
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
Welcome
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer SessionSteveKinseyChief Financial Officer &Chief Accounting Officer
Financial Review & Capital Allocation
Key Takeaways
48
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
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
49
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)
50(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
51
Steady Free Cash Flow
(1) Operating Cash flow minus Capital Expenditures. See non-GAAP reconciliations at the end of this presentation.
$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
Consistent Capital Allocation
52
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)
Track Record of De-Leveraging Post-M&A
53(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
54
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
55
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 reconciliations at the end of this slide presentation.(3) Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.
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
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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
Question & Answer Session
Strategic Priorities
Growth Imperatives & Supply Chain Optimization
Driving Brand Relevance
Brand Portfolio Strategy
Acquisition Strategy
Financial Review & Capital Allocation
Question & Answer Session
Information Regarding Non-GAAP Financial Measures
59
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.
Reconciliation of Non-GAAP Financial Measures
60
For the 12 Week Period
Ended
For the 12 Week Period
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
61
Reconciliation of Non-GAAP Financial Measures
For the 12 Week Period Ended
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
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Reconciliation of Non-GAAP Financial Measures
For the 12 Week Period
Ended
For the 12 Week Period
EndedJuly 11, 2020 July 13, 2019
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
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Reconciliation of Non-GAAP Financial Measures
For the 12 Week Period
Ended
For the 12 Week Period
EndedJuly 11, 2020 July 13, 2019
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
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Reconciliation of Non-GAAP Financial Measures
For the 12 Week Period Ended
For the 12 Week Period Ended
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
65
Reconciliation of Non-GAAP Financial Measures
For the 12 Week Period Ended
For the 12 Week Period Ended
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
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Reconciliation of Non-GAAP Financial Measures
For the 12 Week Period Ended
For the 12 Week Period Ended
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
67
Reconciliation of Non-GAAP Financial Measures
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
Reconciliation of Non-GAAP Financial Measures
68
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*
Reconciliation of Non-GAAP Financial Measures
69
For the 12 Week Period
EndedFor the 12 Week
Period Ended
For the 16 Week Period
Ended
For the 12 Week Period
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
70
Reconciliation of Non-GAAP Financial Measures
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