COMPANY OVERVIEW NOVEMBER 2017

Transcription

1 COMPANY OVERVIEW NOVEMBER 2017

2 REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this press release 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, 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) competitive conditions in the baked foods industry, including promotional and price competition, (b) 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, (c) the success of productivity improvements and new product introductions, (d) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer's business, (e) fluctuations in commodity pricing, (f) energy and raw material costs and availability and hedging and counterparty risk, (g) our ability to fully integrate recent acquisitions into our business, (h) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value; (i) 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, (j) consolidation within the baking industry and related industries; (k) 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; (l) increasing legal complexity and legal proceedings that we are or may become subject to; and (m) 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. 2

3 BUSINESS OVERVIEW Sales Overview Brand Portfolio Highlights 17Q3TTM Sales $3.9 billion Store branded retail 15% Branded breads 48% Nature s Own is the #1 loaf bread brand Wonder has 98% consumer awareness Non-retail & other 27% Branded Retail 58% Dave s Killer Bread is #1 organic bread brand Branded snack cakes 10% Tastykake the iconic Philly brand 3

4 OPERATIONS OVERVIEW 48 Operating Bakeries Direct-store-distribution access to 85% Warehouse distribution of the U.S. population NATIONWIDE Channels served Grocery / Mass Natural & Organic Club & Dollar, C-store E-commerce Foodservice & Vending 10,400 employees 5,400 independent distributors 4

5 LONG-TERM TRACK RECORD 10-year Shareholder Results: TTM Dividends per Share Cumulative Total Shareholder Return $1.00 $0.90 $0.80 $0.70 $300 $250 TSR-FLO TSR-SPY* $0.60 $200 $0.50 $0.40 $150 $0.30 $100 $0.20 $0.10 $50 $- $- Source: Capital-IQ, data as of Sep 23, 2017, Cumulative Total Shareholder return equals change in stock price plus dividends received. * SPY: SPDR S&P 500 ETF 5

6 FLOWERS LONG-TERM OPPORTUNITY 1. Well-positioned in a huge category that is relevant to consumers and profitable for retailers 2. Flowers has built strong competitive advantages and has a strong platform for continued growth 3. Recognize that to drive shareholder value, Flowers must adapt to an ever-changing marketplace Clear Strategic Priorities to Create Shareholder Value Well-positioned to Deliver Top-tier Shareholder Returns 6

7 COMPETITIVE POSITION #2 Baker and Growing Share Fresh Packaged Breads Share Flowers Market Share Fresh Pkg Breads 24.7% Store brands 15.6% Flowers % Independent bakers 30.4% BBU/Sara Lee 5.9% Pepperidge Farm 12Q3 13Q3 14Q3 15Q3 16Q3 17Q3 IRI Flowers custom data base Total US MultiOutlet 12 weeks ended 8-Oct

8 BROAD CAPABILITIES Strong DSD Network 39 bakeries serving approximately 5,400 independent distributor partners Access to approximately 85% of the U.S. population National Warehouse Platform Important future resource as business grows to include new sales channels and product types Ability to serve the market across fresh, frozen and refrigerated products and make products available in multiple channels 84% of Flowers sales DSD Footprint Bakeries Increasing Investments in Innovation, Marketing and Bakeries Can Further Differentiate Flowers Products and Strengthen Relationships With IDPs, Consumers and Customers 8

9 FRESH BAKERY OVERVIEW Large and stable market $31 Billion Fresh Bakery Market US Fresh Bakery - Retail Outlets (in billions) $7.4B Foodservice (2) $22.5 $23.2 $23.8 $24.0 $24.0 $24.0B Retail Breads, Snack Cakes, and Tortillas (1) 13FY 14FY 15FY 16FY 17Q3-TTM (1) Data for Retail Outlets sourced from IRI. TTM: 52 weeks ended 8-Oct-2017 (2) Data for Foodservice sourced from Techonomic

10 CATEGORY REVIEW FRESH PACKAGED BREADS Dollar Sales % Chg Unit Sales % Chg 1.5% 1.3% 1.1% 1.1% 1.1% 0.9% 0.4% 0.6% 0.6% 0.6% 0.6% 0.5% 0.1% -0.5% -0.3% -0.7% -0.1% -0.2% -0.9% -0.9% -0.6% -0.4% -0.8% -1.2% -1.1% -1.1% Q Q Q Q Q Q Q Q Q Q Q Q Q Source: Flowers Custom Database IRi Total US Mulo + C Store 10

11 CATEGORY REVIEW TOTAL CATEGORY: COMMERCIAL CAKE Dollar Sales % Chg Unit Sales % Chg 5.9% 6.5% 6.9% 5.1% 5.0% 4.4% 4.1% 4.0% 3.4% 3.4% 1.8% 1.7% 2.0% 2.4% 1.1% 1.2% 1.0% 1.1% 1.2% 0.0% 0.0% 0.1% -0.6% -0.1% -0.9% -2.5% Q Q Q Q Q Q Q Q Q Q Q Q Q Source: Flowers Custom Database IRi Total US Mulo + C Store 11

12 FLOWERS MARKET SHARE FLO Bread Share FLO Cake Share Q Q Q Q Q Source: Flowers Custom Database IRi Total US Mulo + C Store 12

13 BRAND STRENGTH Strong demand for differentiated products Fresh Packaged Breads Store Brand Share Organic Fresh Packaged Breads 26.9% 26.6% 26.1% 25.0% 24.7% Flowers organic bread share: 48.0 $179.8 $220.9 $275.5 $357.8 $ FY 14FY 15FY 16FY 17Q3-TTM 13FY 14FY 15FY 16FY 17Q3-TTM (1) Source: IRI Custom Database Total US + Convenience. TTM: 52 weeks ended 8-Oct

14 ORGANICS GENERATING GROWTH TOTAL ORGANIC FRESH PACKAGED BREADS FLO DOLLAR SHARE OF TOTAL ORGANICS $456.3 $179.8 $220.8 $275.4 $ FY 2013 FY 2014 FY 2015 FY 2016 TTM 2017 FY 2013 FY 2014 FY 2015 FY 2016 TTM 2017 DKB IS DRIVING FLOWERS MARKET SHARE GAINS IN THE KEY GROWTH SEGMENT OF THE CATEGORY Source: IRI Custom Database Total US + Convenience, calendar year ending 1-Jan weeks ended 8-Oct

15 PROJECT CENTENNIAL Strategic Priorities: IMPROVE PROFITABILITY Generate Fuel for Growth Develop Leading Capabilities DRIVE GROWTH Reinvigorate the Core Capitalize on Adjacencies GROW SALES EXPAND MARGINS DELIVER SHAREHOLDER VALUE Focused on Improving Margins and Profitably Growing the Top-line 15

16 PROJECT CENTENNIAL VALUE CREATION PLAN Reduce costs to fuel growth Invest in capabilities Reinvigorate core business Capitalize on product adjacencies Taking Decisive Action and Working With Urgency to Drive Improvements 16

17 KEY SAVINGS INITIATIVES UNDERWAY Operate with Efficiency Centralize Where Appropriate Leverage Scale Effectively Purchased Goods & Services Initiatives Increased cost discipline Continuous improvement and network optimization programs Centralized purchasing to ensure best value Policy and specifications Supply Chain Optimization Initiatives to drive ongoing productivity gains Reduce operational complexity Capitalize on scale 17

18 ENHANCED ORGANIZATIONAL STRUCTURE Elevating the Capabilities of Our Team Align company to overall strategy Propel growth of the core business focusing on brand investment, local relationships and reliance on fresh products delivered via DSD Drive accountability and responsibility Increase standardization and centralization Voluntary Separation Incentive Program enabled meaningful headcount reduction With a Less Complex and More Focused Organizational Structure, Flowers Will Lower Costs and Grow a Business that is Now Operating on a National Level 18

19 NEW STRUCTURE SUMMARY Transition Underway to Revised Organizational Structure Two BUs: Fresh Packaged Bread and Snacking/Specialty Fresh Packaged Bread: Optimize profitability and support growth of core bread products Snacking/Specialty: Drive growth in products outside the retail bread aisle Supported by distinct Sales, Marketing, Supply Chain and Administrative/Strategic functions Transition to the new structure with full implementation expected to be completed at the beginning of fiscal 2019, will use DSD and Warehouse Delivery financial reporting segments until all systems fully transitioned New Company Structure will Enhance Individual Accountability and Operational Efficiency 19

20 FY 2017 & 2018 SAVINGS TARGETS & CONSIDERATIONS Cumulative Gross Savings vs 16FY: PG&S, SCO, Organization Initiatives $70-80M Offsets to 2018 Gross Savings Estimates: Anticipating 2018 input cost inflation of $30-$40 million Incremental brand investments $25-30M 17FY-Est 18FY-Est Planning process underway for 2018, will provide additional color when 2018 guidance provided with 17Q4 earnings release (mid-feb 2018) Maintain 18FY EBITDA margin goal of 12%-13% 20

21 PROJECT CENTENNIAL ROADMAP FY FUND & DESIGN THE FUTURE FY 2019 & Beyond TRANSFORM TO THE FUTURE Focus Generate savings Design future organization Invest in growth Leverage capabilities Targets Sales growth: flat to +2% EBITDA margins: ~12% to 13% Sales growth: 3% to 4% EBITDA margins: ~13% to 14% Targeting at least 250bps net overall EBITDA margin improvement by FY21 21

22 REINVIGORATE CORE BUSINESS Invest In Brands Align brands to consumers ROI-focused investments in brand growth and innovation Improve Execution Streamline assortment - Fewer SKU s Reduced complexity Enable Partners Improve business intelligence PartnerUp program helps independent distributor partners grow their businesses Investing in Brands and Improving Execution to Drive Growth 22

23 BRAND INVESTMENT FRAMEWORK Innovation and marketing investments to drive growth of differentiated brands High-Potential Brands Focus on innovation and growth Strong consumer appeal Differentiated products Established Brands Focus on margin and cash flow Provide Scale Strengthen competitive position in the category Strong market potential High ROI from innovation and marketing investments Generating Strong Returns Through Brand Investment 23

24 OPTIMIZE ASSORTMENT Sales by SKU Better focus marketing investments 20% of SKUs driving 80%+ of sales Longer run times Improved efficiencies Enhanced margins Reducing the complexity of the assortment SKU s Closing of our Winston-Salem snack cake facility in 17Q4 Focusing on Higher-margin, Faster-turning Items 24

25 DSD ENABLEMENT Strengthening Our Business Relationship with IDPs Through New PartnerUp Program Voluntary Feedback Program Weekly discussions of best practices and opportunities for business growth Increasing Ordering Efficiency & Sales Potential Providing IDPs with better information and tools to improve order quality and identify sales opportunities 25

26 UNDERDEVELOPED PRODUCT SEGMENTS Focusing On Growing Share In Underdeveloped Markets Category Flowers 24.1% 41.3% 14.2% 32.4% 9.9% Segment Units % of Total Category 24.0% 15.3% 13.9% 11.1% 7.5% 81.3% of Flowers sales are in segments that account for only 48.2% of Total Category Dollars 1.4% 1.7% 2.0% 0.0% 0.8% 0.4% WHITE LOAF SOFT VARIETY LOAF SPECIALTY/PREMIUM LOAF SANDWICH BUNS/ROLLS DINNER BREAD/ROLLS BREAKFAST BREADS PITAS/FLATBREAD SANDWICH ROUNDS/THINS Source: IRI Custom Database 2017 Q3 TTM ended 8-Oct

27 UNDERDEVELOPED GEOGRAPHIES West Plains Midwest 5.9 Northeast California South FLOWERS BBU STORE BRAND OTHER BRAND Bolt-on Acquisitions Remain Key Part of Our Growth Strategy Source: IRI Custom Database Dollar Share of Category 2017 Q3 TTM ended 8-Oct

28 CAPITALIZE ON PRODUCT ADJACENCIES Expanding Position In High-Growth Categories BUILD ON LEADING FOODSERVICE POSITION Expanding share of growing specialty products Moving beyond loaf and bun Breakfast items and dinner rolls are opportunities to increase share GROW IN-STORE DELI/BAKERY Grow specialty brands on the store perimeter GROW IN BAKED SNACKS Evolve cake strategy to leverage dual-brand capabilities Further diversify into snacking occasions Diversify business into growing segments of the bakery category 28

29 FINANCIAL TRENDS & COST COMPONENTS Operating Results Components of Adj EBITDA** % of FY16 Sales Billions Sales Adj EBITDA Mgn** 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% EBITDA % of Sales SG&A and Other 15.2% Shipping/ Distribution 21.8% Adj. EBITDA ** 11.4% Ing & Pkg 28.9% Conversion *** 22.7% - 0.0% * 53-week year; ** Adjusted for items affecting comparability. See non-gaap reconciliations at the end of the slide presentation. *** Includes direct labor and indirect manufacturing expenses. 29

30 CONSISTENT CASH FLOW Cash Flows, millions Operating Cash Flow Capital Expenditures $315 $318 $346 $270 $271 $217 $67 $99 $84 $91 $102 $86 12FY 13FY 14FY* 15FY 16FY 17Q3-TTM Consistent Cash Flow Supports Balanced Capital Allocation Strategy *53-week year 30

31 BALANCED CAPITAL ALLOCATION Capital Allocation Dividends Share Repurchases Cash for Acquisitions $318 $416 $395 Capital Allocation Principles: Support core business growth Strong dividend Investment grade credit rating $19 $9 $39 $7 $126 $3 $86 $93 $102 $120 $131 $138 Accretive acquisitions Opportunistic share repurchases 12FY 13FY 14FY* 15FY 16FY 17Q3-TTM (Amounts in millions) Focused On Consistent, Prudent Capital Allocation *53-week year 31

32 CONSERVATIVE FINANCIAL POSITION Total Debt & Capital Leases Aggregate Maturities, at 17Q3 Total Debt & Capital Leases $603 $919 $759 $1,005 $958 $856 Since end of fiscal 2015: Reduced Total Debt & Capital Lease Obligations by $149M At 17Q3: Leverage ratio of 1.9X, ~$670M available liquidity on undrawn borrowing arrangements $808 $3 $12 $26 $12 $4 12FY 13FY 14FY 15FY 16FY 17Q3 17FY-Rem 18FY 19FY 20FY 21FY 22FY+ (Amounts in millions) Maintaining a Conservative Financial Profile 32

33 OBJECTIVES FOR 2019 & BEYOND Deliver organic sales growth above categories Pursue accretive M&A opportunities Targeting long-term sales growth of 3% to 4% Execute on initiatives to realize 250bps of EBITDA margin expansion by fiscal 2021 Achieve long-term EPS CAGR of 8%-10% Dividend yield of 2%-3% Well-positioned to Deliver Solid Returns Over the Long-term 33

34 Q BUSINESS PERFORMANCE Sales growth of 2.1%, excluding divestiture Record third quarter market share of 15.8 in packaged bread Brand portfolio is outperforming the category Improved sales and manufacturing efficiencies Improved cost discipline across organization 34

35 Q FINANCIAL REVIEW NET SALES $932.8M +1.5% Divestiture decreased sales by 60bps Price/Mix -0.6%; Volume +2.7% Growth driven primarily by organic breads, offset somewhat by branded conventional buns and rolls. The hurricanes also positively impacted sales in the quarter. ADJ. EBITDA 1 $112.4M Increased 9.1% 12.0% of sales, up 80bps Increased volumes and improved efficiencies drove margin expansion (1) Earnings before interest, taxes, depreciation & amortization, adjusted for matters affecting comparability. See non-gaap reconciliations at the end of this slide presentation. CASH FLOWS Cash from Ops = $50.4 million, decreased due to changes in hedge margin and taxes receivable Capex = $19.3 million Dividends = $35.6 million Net borrowings of $6.9 million DILUTED EPS ($0.16) ADJ. DILUTED EPS 2 $0.23 Higher adj. EBITDA and benefit from hurricanerelated sales of approximately $0.01 per share (2) Adjusted for matters affecting comparability. See non-gaap reconciliations at the end of this slide presentation. 35

36 FY 2017 UPDATED OUTLOOK REVENUE ADJ EPS 1-1% to flat GAAP EPS $0.47 to $0.51 $0.85 to $0.90 Adj EPS excludes: Mix plant gain on sale of $0.09, Project Centennial consulting costs of $0.11 to $0.12, restructuring and related impairment charges of $0.29, MEPP withdrawal liability of $0.05, pension and legal settlements of $0.02 OTHER Depreciation & Amortization $145 to $150 million Net interest expense $14 to $16 million Effective GAAP tax rate Approximately 33.0% Diluted shares outstanding ~210.5 million Capital expenditures $85 to $90 million (1) Adjusted for matters affecting comparability. See non-gaap reconciliations at the end of this slide presentation. 36

37 REGARDING NON-GAAP FINANCIAL MEASURES 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, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income by segment, adjusted EPS, adjusted selling, distribution and administrative expenses (SD&A), gross margin excluding depreciation and amortization 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 as earnings from continuing operations before interest, income taxes, depreciation, amortization and income attributable to non-controlling interest. 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 widelyaccepted 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 net income, adjusted operating income by segment, and adjusted net income per diluted share, respectively, excluding the impact of asset impairment charges, acquisition-related costs, and pension plan settlements. 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. Net debt to EBITDA is used as a measure of financial leverage employed by the company. 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. 37

38 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods Reconciliation of Net Income to Adjusted EBITDA (000's omitted) Fiscal 2016 Fiscal 2015 Fiscal 2014 Fiscal 2013 Fiscal 2012 Fiscal 2011 Fiscal 2010 Fiscal 2009 Fiscal 2008 Fiscal 2007 Fiscal 2006 Fiscal 2005 Fiscal 2004 Net Income attributable to Flowers Foods, Inc. $ 163,776 $ 189,191 $ 175,739 $ 230,894 $ 136,121 $ 123,428 $ 137,047 $ 130,297 $ 119,233 $ 94,615 $ 81,043 $ 61,231 $ 50,774 (Income)/loss from discontinued operations, net of tax (6,731) 1,627 3,486 Cumulative effect of a change in accounting principle Net income attributable to noncontrolling interest ,415 3,074 3,500 3,255 2,904 1,769 Income tax expense 85, ,840 92,315 91,479 72,651 68,538 73,333 74,047 67,744 54,970 45,304 39,861 35,071 Interest income, net 14,353 4,848 7,341 12,860 9,739 (2,940) (4,518) (1,426) (7,349) (8,404) (4,946) (6,337) (8,826) Depreciation and amortization 140, , , , ,690 94,638 85,118 80,928 73,312 66,094 64,250 59,344 56,702 EBITDA from Continuing Operations 404, , , , , , , , , , , , ,976 Asset impairment and facility closure costs/divestiture 24,877 4,507 9, , Pension plan settlement loss 6,646-15, Legal settlement 10, Project Centennial consulting costs 6, Acquisition-related costs - 6,187-17,776 9,560 6, Bargain purchase gain (50,071) Adjusted EBITDA $ 453,106 $ 440,748 $ 429,044 $ 421,429 $ 330,761 $ 294,318 $ 290,980 $ 287,261 $ 256,014 $ 210,775 $ 182,743 $ 158,630 $ 138,976 Net Sales $ 3,926,885 $ 3,778,505 $ 3,748,973 $ 3,732,616 $ 3,031,124 $ 2,759,367 $ 2,560,787 $ 2,600,849 $ 2,414,892 $ 2,036,674 $ 1,888,654 $ 1,715,869 $ 1,551,308 Adjusted EBITDA Margin 11.5% 11.7% 11.4% 11.3% 10.9% 10.7% 11.4% 11.0% 10.6% 10.3% 9.7% 9.2% 9.0% 38

39 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Net income (loss) per diluted common share $ (0.16) $ 0.19 Restructuring and related impairment charges Lease terminations/legal settlement/extinguishment loss Project Centennial consulting costs Pension plan settlement loss Multi-employer pension plan withdrawal costs Adjusted net income per diluted common share $ 0.23 $ 0.21 Certain amounts may not add due to rounding. Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted, except per share data) Reconciliation of Earnings (Loss) per Share to Adjusted Earnings per Share 39

40 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted, except per share data) Reconciliation of Net Income (Loss) to Adjusted EBIT and Adjusted EBITDA For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Net income (loss) $ (33,571) $ 40,216 Income tax expense (benefit) (22,925) 21,232 Interest expense, net 2,730 4,683 Earnings (loss) before interest and income taxes (53,766) 66,131 Lease terminations and legal settlement 4,253 1,250 Project Centennial consulting costs 7,050 1,219 Restructuring and related impairment charges 100,549 - Multi-employer pension plan withdrawal costs 18,268 - Pension plan settlement loss 3,030 1,832 Adjusted EBIT 79,384 70,432 Depreciation and amortization 32,972 32,530 Adjusted EBITDA $ 112,356 $ 102,962 Sales $ 932,822 $ 918,791 Adjusted EBITDA margin 12.0% 11.2% 40

41 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted) Reconciliation of Net Income (Loss) to Adjusted EBITDA For the 12 Week For the 16 Week For the 12 Week For the 12 Week Trailing 52 Week Period Ended Period Ended Period Ended Period Ended Period Ended December 31, 2016 April 22, 2017 July 15, 2017 October 7, 2017 October 7, 2017 Net income (loss) $ 13,042 $ 60,418 $ 44,740 $ (33,571) $ 84,629 Income tax expense (benefit) 4,244 34,659 22,148 (22,925) 38,126 Interest expense, net 3,882 5,048 3,278 2,730 14,938 Depreciation and amortization 32,274 47,188 34,128 32, ,562 EBITDA (loss) 53, , ,294 (20,794) 284,255 Gain on divestiture - (28,875) - - (28,875) Project Centennial consulting costs 3,849 15,406 9,389 7,050 35,694 Lease terminations - (1,279) - - (1,279) Restructuring and related impairment charges , ,549 Asset impairment 24, ,877 Multi-employer pension plan withdrawal costs ,268 18,268 Pension plan settlement loss ,030 3,203 Legal settlement 9, ,253 13,753 Adjusted EBITDA $ 91,591 $ 132,815 $ 113,683 $ 112,356 $ 450,445 41

42 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted) Reconciliation of Debt to Net Debt and Calculation of Net Debt to Trailing Twelve Month Adjusted EBITDA Ratio As of October 7, 2017 Current maturities of long-term debt and capital lease obligations $ 12,469 Long-term debt and capital lease obligations 843,639 Total debt and capital lease obligations 856,108 Less: Cash and cash equivalents 7,074 Net Debt $ 849,034 Adjusted EBITDA for the Trailing Twelve Months Ended October 7, 2017 $ 450,445 Ratio of Net Debt to Trailing Twelve Month EBITDA

43 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted) Reconciliation of Gross Margin For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Sales $ 932,822 $ 918,791 Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) 476, ,760 Gross Margin excluding depreciation and amortization 456, ,031 Less depreciation and amortization for production activities 19,553 19,807 Gross Margin $ 437,099 $ 422,224 Depreciation and amortization for production activities $ 19,553 $ 19,807 Depreciation and amortization for selling, distribution and administrative activities 13,419 12,723 Total depreciation and amortization $ 32,972 $ 32,530 43

44 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted) Reconciliation of Selling, Distribution and Administrative Expenses to Adjusted SD&A For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Selling, distribution and administrative expenses $ 355,599 $ 341,538 Project Centennial consulting costs (7,050) (1,219) Legal settlement and related tax liabilities (4,253) (1,250) Adjusted selling, distribution and administrative expenses $ 344,296 $ 339,069 Sales $ 932,822 $ 918,791 Adjusted SD&A as a percent of sales 36.9% 36.9% 44

45 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted, except per share data) Reconciliation of Adjusted EBITDA to Cash Flow from Operations For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Adjusted EBITDA $ 112,356 $ 102,962 Adjustments to reconcile net income (loss) to net cash provided by operating activities 85,903 10,595 Changes in assets and liabilities and pension contributions (34,948) 7,185 Income tax (expense) benefit 22,925 (21,232) Interest expense, net (2,730) (4,683) Lease terminations and legal settlement (4,253) (1,250) Project Centennial consulting costs (7,050) (1,219) Restructuring and related impairment charges (100,549) - Multi-employer pension plan withdrawal costs (18,268) - Pension plan settlement loss (3,030) (1,832) Cash Flow From Operations $ 50,356 $ 90,526 45

46 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted, except per share data) Reconciliation of Income Tax Expense (Benefit) to Adjusted Income Tax Expense For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Income tax expense (benefit) $ (22,925) $ 21,232 Tax impact of: Lease terminations and legal settlement 1, Project Centennial consulting costs 2, Restructuring and related impairment charges 38,711 - Multi-employer pension plan withdrawal costs 7,033 - Pension plan settlement loss 1, Adjusted income tax expense $ 28,338 $ 23,619 46

47 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Flowers Foods, Inc. Reconciliation of GAAP to Non-GAAP Measures (000's omitted, except per share data) Reconciliation of Net Income (Loss) to Adjusted Net Income For the 12 Week For the 12 Week Period Ended Period Ended October 7, 2017 October 8, 2016 Net income (loss) $ (33,571) $ 40,216 Lease terminations and legal settlement 2, Project Centennial consulting costs 4, Loss on extinguishment of debt - 1,168 Restructuring and related impairment charges 61,838 - Multi-employer pension plan withdrawal costs 11,235 - Pension plan settlement loss 1,863 1,127 Adjusted net income $ 48,316 $ 44,030 47

48 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Reconciliation of Earnings per Share - Full Year Fiscal 2017 Guidance Range Estimate Net income per diluted common share $ 0.47 to $ 0.51 Gain on sale of Specialty Blending (0.09) (0.09) Project Centennial consulting costs Restructuring and related impairments Pension plan settlement loss Multi-employer pension plan withdrawal costs Lease terminations and legal settlement Adjusted net income per diluted common share $ 0.85 to $