Investor Briefing SEPTEMBER 27, 2017

Transcription

1 Investor Briefing SEPTEMBER 27, 2017

2 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) any existing or additional disruptions to the business due to weather or other circumstances, including government regulation or restrictions resulting therefrom; (m) increasing legal complexity and legal proceedings that we are or may become subject to; and (n) 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 Introductions Overview Current Category Review Introductions J.T. Rieck VP of Investor Relations and Treasurer Project Centennial Financial Performance / Outlook Q&A

4 Flowers Management Team Allen L. Shiver President & Chief Executive Officer R. Steve Kinsey Chief Financial Officer & Chief Administrative Officer Presenters 4

5 Flowers Management Team Brad Alexander President, Fresh Packaged Breads David Roach President, Snacking/Specialty Keith Wheeler Chief Sales Officer Steve Avera Chief Legal Counsel Karyl Lauder Chief Accounting Officer Robert Benton Chief Supply Chain Officer Ryals McMullian Chief Strategy Officer Tonja Taylor Chief Human Resources Officer Mary Krier Senior Vice President of Communications Paul Baltzer Managing Director of Communications Natalie Simpson Treasury Director Sally Bowman Director of Communications 5

6 Introductions Overview Category & Consumer Trends Overview Project Centennial Financial Performance / Outlook Q&A

7 Business Overview Sales Overview 17Q2TTM Sales $3.9 billion Store branded retail 15% Non-retail & other 27% Branded Retail 58% Branded breads 48% Branded snack cakes 10% Brand Portfolio Highlights Nature s Own is the #1 loaf bread brand Wonder has 98% consumer awareness Dave s Killer Bread is #1 organic bread brand Tastykake the iconic Philly brand 7

8 Operations Overview 49 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 10,600 employees 5,100 independent distributors 8

9 Long-term Track Record 10yr 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 $- $- 9 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

10 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 SHAREHOLER VALUE WELL-POSITIONED TO DELIVER TOP-TIER SHAREHOLDER RETURNS 10

11 Competitive Position #2 Baker and Growing Share Fresh Packaged Breads Share Flowers Market Share Fresh Pkg Breads 25.1% Store brands 15.4% Flowers % Independent bakers 30.0% BBU/Sara Lee 5.8% Pepperidge Farm 12Q2 13Q2 14Q2 15Q2 16Q2 17Q2 11 IRI Flowers custom data base Total US MultiOutlet 12 weeks ended

12 What It Takes to Compete Effectively Brands and products with a reputation for consistent high-quality The ability to bake locally and deliver into the market every day National reach Reputation of brands and service opens many doors for distribution growth and product line extensions 12

13 Broad Capabilities Strong DSD Network 39 bakeries serving approximately 5,100 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 13

14 Overview Category & Consumer Trends Category & Consumer Project Centennial Financial Performance / Outlook Q&A Trends

15 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 $23.9 $23.9 $23.9B Retail Breads, Snack Cakes, and Tortillas (1) TTM 15 (1) Data for Retail Outlets sourced from IRI, FY ended 1-Jan-2017 (2) Data for Foodservice sourced from Techonomic 2016

16 Recent Category Trends Fresh Packaged Breads Trends 3.0% Dollar Sales % Chg Unit Sales % Chg 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 8WE 9/10/17 16 Source: IRI

17 Brand Strength Strong demand for differentiated products Fresh Packaged Breads Store Brand Share Organic Fresh Packaged Breads 26.9% 26.6% 26.0% Flowers organic bread share: 48.5 $275.4 $357.6 $ % 24.6% $179.8 $220.8 FY 2013 FY 2014 FY 2015 FY 2016 TTM 2017 FY 2013 FY 2014 FY 2015 FY 2016 TTM (1) Source: IRI Custom Database Total US + Convenience, calendar year ending 1-Jan weeks ended 23-Jul-2017.

18 Today s Consumer The market is changing as consumers expect more from their food MORE RELEVANT Fit lifestyle, values INNOVATION Seeking the different MULTIPLE CHANNELS More engaged 18

19 Key Principles STAY CLOSE TO CONSUMERS AND THEIR NEEDS Investing in product innovation FLEXIBILITY Efficiently integrate emerging channels into business and expand reputation for outstanding service MANAGE COST STRUCTURE Committed to effective and efficient organization EXPERIENCED AND EVOLVING MARKET LEADER 19

20 Overview Category & Consumer Trends Project Centennial Project Centennial Financial Performance / Outlook Q&A

21 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 21

22 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 22

23 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 23

24 Project Centennial Value Creation plan Reduce costs to fuel growth Develop leading capabilities Reinvigorate core business Capitalize on product adjacencies TAKING DECISIVE ACTION AND WORKING WITH URGENCY TO DRIVE IMPROVEMENTS 24

25 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 25

26 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 Transitioning to new structure in FY2018, will use DSD and Warehouse Delivery financial reporting segments until all systems fully transitioned NEW COMPANY STRUCTURE WILL ENHANCE INDIVIDUAL ACCOUNTABILITY AND OPERATIONAL EFFICIENCY 26

27 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 $12M $25-30M Incremental brand investments Planning process underway for 2018, will provide additional color when 2018 guidance provided with 17Q4 earnings release (mid-feb 2018) 17YTD-Q2 17FY-Est 18FY-Est Maintain 18FY EBITDA margin goal of 12%-13% 27

28 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 28

29 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 29

30 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 30

31 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 Strong market potential Established Brands Focus on margin and cash flow Provide scale Strengthen competitive position in the category High ROI from innovation and marketing investments GENERATING STRONG RETURNS THROUGH BRAND INVESTMENT 31

32 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 October closing of our Winston-Salem snack cake facility FOCUSING ON HIGHER-MARGIN, FASTER-TURNING ITEMS 32

33 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 33

34 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 34

35 Underdeveloped Product Segments Focusing On Growing Share In Underdeveloped Markets Category Flowers 20.1% 38.2% 32.9% Segment Dollar % of Total Category 20.8% 13.9% 14.2% 11.3% 14.3% 14.6% 13.3% 85.4% of Flowers sales are in segments that only account for 54.8% of Total Category Dollars 1.4% 1.5% 2.0% 0.0% 1.0% 0.4% WHITE LOAF SOFT VARIETY LOAF SPECIALTY/PREMIUM LOAF SANDWICH BUNS/ROLLS DINNER BREAD/ROLLS BREAKFAST BREADS PITAS/FLATBREAD SANDWICH ROUNDS/THINS 35 Source: IRI Custom Database 2017 Q2 TTM

36 Underdeveloped Geographies West Plains Midwest 5.8 Northeast California South FLOWERS BBU STORE BRAND OTHER BRAND BOLT-ON ACQUISITIONS REMAIN KEY PART OF OUR GROWTH STRATEGY 36 *Excluding California Source: IRI Custom Database Dollar Share of Category 2017 Q2 TTM

37 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 37

38 Overview Category & Consumer Trends Financial Project Centennial Financial Performance / Outlook Q&A Performance / Outlook

39 EBITDA % of Sales Billions Financial Review Operating Results Sales Adj EBITDA Mgn** 14.0% 12.0% 10.0% TRACK RECORD OF SALES GROWTH GENERATING CASH TO SUPPORT DIVIDEND AND GROWTH OPPORTUNITIES % 6.0% FOCUS ON MARGIN IMPROVEMENT % 2.0% 0.0% MAINTAINING CONSERVATIVE FINANCIAL POSITION & INVESTMENT GRADE CREDIT RATING STRONG FINANCIAL PROFILE OVER THE LONG-TERM 39 * 53-week year; ** Adjusted for items affecting comparability. See non-gaap reconciliations at the end of the slide presentation.

40 Consistent Cash Flow Cash Flows, millions Operating Cash Flow Capital Expenditures $270 $315 $318 $346 $312 $217 $67 $99 $84 $91 $102 $92 12FY 13FY 14FY* 15FY 16FY 17Q2-TTM CONSISTENT CASH FLOW SUPPORTS BALANCED CAPITAL ALLOCATION STRATEGY 40 *53-week year

41 Balanced Capital Allocation Capital Allocation Dividends Share Repurchases Cash for Acquisitions $318 $416 $395 Capital Allocation Principles: Support core business growth Strong dividend $19 $9 $39 $7 $126 $3 $86 $93 $102 $120 $131 $136 12FY 13FY 14FY* 15FY 16FY 17Q2-TTM Amounts in millions Investment grade credit rating Accretive acquisitions Opportunistic share repurchases FOCUSED ON CONSISTENT, PRUDENT CAPITAL ALLOCATION 41 *53-week year

42 Conservative Financial Position Total Debt & Capital Leases Aggregate Maturities, at 17Q2 Total Debt & Capital Leases $603 $919 $759 $1,005 $958 $847 Since end of fiscal 2015: Reduced Total Debt & Capital Lease Obligations by $158M At 17Q2: Leverage ratio of 1.9X, ~$650M available liquidity on undrawn borrowing arrangements $5 $22 $10 $8 $3 $806 Amounts in millions 12FY 13FY 14FY 15FY 16FY 17Q2 17FY-Rem 18FY 19FY 20FY 21FY 22FY+ MAINTAINING A CONSERVATIVE FINANCIAL PROFILE 42

43 Fiscal 2017 Outlook 2017 Guidance: Sales: -1% to flat GAAP EPS: $0.67 to $0.69 Adj. EPS (1) : $0.85 to $0.90 Adj EPS (1) excludes: Mix plant gain on sale of $0.09 Centennial consulting costs of $0.11 to $0.12 VSIP (2) -related costs of $0.08 to $0.09 MEPP (3) withdrawal costs of $0.05 to $0.06 Legal settlement of ~$0.01 Plant closure and lease termination costs of ~$0.02 Highlights: Gaining market share Production costs declining Starting to capture cost savings Team provided excellent service during recent hurricanes Expected Capital expenditures of $95 to $105 million 43 (1) Adjusted for items affecting comparability. See non-gaap reconciliations at the end of the presentation. (2) VSIP: Voluntary Separation Incentive Program; (3) MEPP: Multi-Employer Pension Plan

44 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 44

45 Key Takeaways IMPROVING PROFITABILITY & GROWING SALES PUSHING PRODUCTIVITY IN OUR OPERATIONS BECOMING MORE STREAMLINED AND EFFICIENT INVESTING IN BRANDS TO MAXIMIZE LONG-TERM PORTFOLIO POTENTIAL ACTIVELY SEEKING WAYS TO GROW & DIVERSIFY THE BUSINESS WORKING WITH URGENCY TO DRIVE SUSTAINABLE, LONG-TERM SHAREHOLDER VALUE CREATION 45

46 Overview Category & Consumer Trends Q&A Project Centennial Financial Performance / Outlook Q&A

47 Appendix Estimated Impact to Operating Income Q Q YTD (amounts in millions) Gain on divestiture $ - to $ - $ (28.9) to $ (28.9) Project Centennial consulting costs Legal settlement VSIP Multi-employer pension withdrawal Lease termination costs Winston-Salem asset impairment and closing costs (excluding amounts in VSIP) Total $ 60.8 to $ 65.3 $ 57.6 to $ 62.1 ** Additionally, we anticipate non-cash charges related to pension settlement charges and trademark impairments from the brand rationalization project to be recorded in Q3 2017; however, we cannot estimate these amounts at this time. 47

48 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, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, adjusted selling, distribution and administrative expenses (SD&A), gross margin excluding depreciation and amortization, adjusted income tax expense and the ratio of net debt to adjusted EBITDA. EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation Plan. 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 are an indicator of the company's ability to incur and service indebtedness and generate free cash flow. 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 nonoperating 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. Our method of calculating EBITDA may differ from the methods used by other companies, and, accordingly, may not be comparable to similarly titled measures used by other companies. Net debt to EBITDA is used as a measure of financial leverage employed by the company. Our method of calculating net debt to EBITDA may differ from the methods used by other companies, and, accordingly, may not be comparable to similarly titled measures used by other companies. 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. This presentation may differ from the methods used by other companies and may not be comparable to similarly titled measures used by other companies. The company may from time-to-time discuss SD&A adjusted for items that are not continuing in nature. The reconciliations attached provide reconciliations of the non- GAAP measures used in this presentation or release to the most comparable GAAP financial measure.

49 Reconciliation of Non-GAAP Financial Measures Flowers Foods, Inc. Reconciliation of Net Income to Adjusted EBITDA (000's omitted, * 53-week year) * * 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, Acquisition-related costs - 6,187-17,776 9,560 6, Bargain purchase gain (50,071) Adjusted EBITDA $ 446,782 $ 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 11.4% 11.7% 11.4% 11.3% 10.9% 10.7% 11.4% 11.0% 10.6% 10.3% 9.7% 9.2% 9.0% 49

50 Reconciliation of Non-GAAP Financial Measures 50

51 Reconciliation of Non-GAAP Financial Measures 51

52 Reconciliation of Non-GAAP Financial Measures Reconciliation of Earnings per Share Full Year Fiscal 2017 Guidance Range Estimate Net income per diluted common share $ 0.67 to $ 0.69 Gain on sale of Specialty Blending (0.09) (0.09) Project Centennial consulting costs VSIP Multi-employer pension withdrawal Legal settlement Plant closure and lease termination costs Adjusted net income per diluted common share $ 0.85 to $ 0.90 Additionally, we anticipate non-cash charges related to trademark impairments and pension settlement losses to be recorded in Q3 2017; however, we cannot estimate these amounts at this time. 52