FOURTH QUARTER 2019 REVIEW FEBRUARY 6, 2020
INFORMATION 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) general economic and business conditions and the 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, (m) product recalls or safety concerns related to our products, 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. 2
Q4 2019 FINANCIAL REVIEW CASH FLOWS – FY19 NET SALES $917.8M +4.2% v PY • Cash from Ops = $367.0 million Canyon acquisition +3.0% • • Capex = $103.7 million Price/Mix +2.1%; Volume -0.9% • • Dividends = $160.0 million Growth from DKB, Canyon, new products • and pricing, offset by volume declines in • Debt paydown = $114.3 million conventional breads & non-retail NET INCOME $2.2M -89.4% v PY GAAP DILUTED EPS $0.01 -$0.09 v PY ADJ. EBITDA 1 $84.5M +7.3% v PY ADJ. DILUTED EPS 2 $0.18 +$0.02 v PY GAAP EPS decreased primarily due to higher Adj. EBITDA was 9.2% of sales, up 30 bps • • legal settlements and restructuring costs Adj. EBITDA increased primarily due to higher • Adj. EPS increased primarily due to higher price/mix and Canyon contribution, offset • adj. EBITDA partially by higher workforce-related costs (1) Earnings before interest, taxes, depreciation & amortization, adjusted for matters affecting (2) Adjusted for matters affecting comparability. See non-GAAP comparability. See non-GAAP reconciliations at the end of this slide presentation. reconciliations at the end of this slide presentation. 3
THREE AREAS OF FOCUS TO IMPROVE PROFITABILITY Optimizing the portfolio and streamlining the supply chain 1. • Completed review of supply chain, which included development of more holistic customer and product profitability tool • Moving forward with actionable insights and formulating specific plans Reinvigorating and investing in the cake business 2. • Developed improvement plan, including new investments, for Navy Yard bakery • Focusing on strategic volume growth to drive cost absorption, reducing complexity through SKU rationalize, identifying additional distribution opportunities, innovating Stabilizing and growing the foodservice business 3. Using product profitability tool to make more informed decisions around pricing • and which product lines to grow. Focusing on winning new business and increasing customer engagement • to drive growth going forward Executing against these priorities to achieve consistent margin expansion 4
FLOWERS’ MARKET SHARE FLO Bread Share FLO Cake Share 17.2 16.9 16.9 16.5 16.4 16.2 16.1 16.1 15.4 8.1 8.0 7.8 7.8 7.7 7.6 7.5 7.3 7.2 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 Source: Flowers Custom Database – IRi Total US Mulo + C Store 5
CATEGORY REVIEW FRESH PACKAGED BREADS Dollar Sales % Chg Unit Sales % Chg 1.6% 1.5% 1.4% 0.6% 0.3% 0.3% 0.2% 0.0% -0.3% -0.4% -0.9% -0.9% -1.2% -1.3% -2.5% -2.9% -3.2% -3.4% 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 Source: Flowers Custom Database – IRi Total US Mulo + C Store 6
CATEGORY REVIEW COMMERCIAL CAKE Dollar Sales % Chg Unit Sales % Chg 3.1% 3.0% 2.9% 2.7% 2.4% 1.9% 1.9% 0.0% -0.1% -0.3% -0.3% -0.7% -0.7% -1.3% -1.4% -1.6% -1.7% -1.9% 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 Source: Flowers Custom Database – IRi Total US Mulo + C Store 7
ORGANICS GENERATING GROWTH TOTAL ORGANIC FRESH PACKAGED BREADS FLO DOLLAR SHARE OF TOTAL ORGANICS $694.7 64.7 $613.0 60.2 52.6 $497.5 42.8 37.3 $365.0 33.3 $283.2 $229.8 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 DKB IS DRIVING FLOWERS’ MARKET SHARE GAINS IN THE KEY GROWTH SEGMENT OF THE CATEGORY Source: Flowers Custom Database – IRi Total US Mulo + C Store 8
DIFFERENTIATED PRODUCTS GAINING SHARE Organic Fresh Packaged Bread Market Fresh Packaged Breads Store Brand Share Flowers organic 26.3 $694.7 bread share: 25.6 $613.0 64.7 $497.5 24.5 24.1 $365.0 23.6 $283.2 22.9 $229.8 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Source: IRI Custom Database Total US + Convenience. 9
FY 2020 GUIDANCE (PR OVIDED FEBR UARY 5 , 2 0 2 0 ) REVENUE CHG (1) +2.0% to +4.0% OTHER Depreciation & amortization $140 to $145 million $0.50 to $0.64 GAAP EPS Approx. $2 million Other pension expense $1.00 to $1.08 ADJ. EPS (2) Net interest expense $8 to $10 million Effective tax rate Approx. 24% (1) Week 53 expected to contribute Diluted shares outstanding Approx. 212.5 million approx. 1.5% of overall sales growth. Capital expenditures $105 to $115 million (2) Adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation. 10
LONG-TERM GOALS • Deliver organic sales growth above category averages • Pursue accretive M&A opportunities • Target long-term sales growth of 2% to 4% • Execute on initiatives to realize 250 bps of EBITDA margin expansion • Achieve long-term diluted EPS CAGR of 8%-10% • Dividend yield of 2%+ Taking Decisive Action to Reduce Costs, Drive Growth, and Create Shareholder Value 11
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