NOVEMBER 9, 2017 - Flowers Foods/media/Files/F/Flowers...Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3...

THIRD QUARTER 2017 EARNINGS PRESENTATIONN OVEMBER 9 , 2017

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.

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TODAY’S AGENDA

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• Review Third Quarter 2017 Business Performance

• Update on Strategic Priorities

• Quarterly Financial Review

• Outlook for Full Year 2017

• Q&A

Q3 2017 BUSINESS PERFORMANCE

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• 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

CATEGORY REVIEW

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0.4%

-0.5%

1.3%

1.1%

1.5%

1.1%

0.6%

-0.1%-0.2%

0.9%

-0.9%

-0.4%

0.5%0.6%

-0.3%

0.6%

-0.7%

0.1%

-1.2%-1.1% -1.1%

-0.9%

0.6%

-0.6%

1.1%

-0.8%

Q 3 2014 Q 4 2014 Q 1 2015 Q 2 2015 Q 3 2015 Q 4 2015 Q 1 2016 Q 2 2016 Q 3 2016 Q 4 2016 Q 1 2017 Q 2 2017 Q 3 2017

Dollar Sales % Chg Unit Sales % Chg

Source: Flowers Custom Database – IRi Total US Mulo + C Store

FRESH PACKAGED BREADS

CATEGORY REVIEW

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5.9%

4.1%

6.5%6.9%

3.4% 3.4%

1.1%

2.0%

1.0%

2.4%

0.1%

-0.1%

1.2%

4.4%4.0%

5.1% 5.0%

1.8% 1.7%

0.0%

1.2%

0.0%

1.1%

-0.6%

-2.5%

-0.9%

Q 3 2014 Q 4 2014 Q 1 2015 Q 2 2015 Q 3 2015 Q 4 2015 Q 1 2016 Q 2 2016 Q 3 2016 Q 4 2016 Q 1 2017 Q 2 2017 Q 3 2017

Dollar Sales % Chg Unit Sales % Chg


TOTAL CATEGORY: COMMERCIAL CAKE

FLOWERS’ MARKET SHARE

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14.614.1

15.0 15.315.8

9.0

10.8

8.98.2 7.9

Q 3 2013 Q 3 2014 Q 3 2015 Q 3 2016 Q 3 2017

FLO Bread Share FLO Cake Share


ORGANICS GENERATING GROWTH

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$179.8 $220.8

$275.4

$357.6

$456.3

F Y 2013 F Y 2014 F Y 2015 F Y 2016 TTM 2017

35.3 34.6 38.2

43.6 48.0

F Y 2013 F Y 2014 F Y 2015 F Y 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-2017. 52 weeks ended 8-Oct-2017.

TOTAL ORGANIC FRESH PACKAGED BREADS FLO DOLLAR SHARE OF TOTAL ORGANICS

PROGRESS ON PROJECT CENTENNIAL

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Generating Fuel for Growth

• Targeting 250bps of net EBITDA margin expansion by 2021• Equates to $100 million of net cost savings on 16FY sales base

• Components of Savings: PG&S, Org Structure, Supply Chain Optimization (SCO)• On track with 18FY gross savings targets of $70 million to $80 million (relative to 16FY)• Building out new org structure, expect to realize related savings in mid-2018; transition to

new structure expected to be completed by the beginning of 19FY• Operations initiatives underway including continuous improvement and supply chain

optimization and realignment; benefits expected second-half of 2018• Closing Winston-Salem snack cake facility to right-size production capacity and improve

profitability of the warehouse segment’s snack cake production

Progress on Additional Initiatives• Successfully contracted with third-parties to expand distribution in Midwest

• More streamlined product assortment introduced to the market place at the end of 17Q3

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PROJECT CENTENNIAL ROADMAP

TARGETING AT LEAST 250BPS OVERALL EBITDA MARGIN IMPROVEMENT BY FY2021

FY 2017-2018 FY 2019 & Beyond

FUND & DESIGNTHE FUTURE

TRANSFORM TO THE FUTURE

Focus• Generate savings• Build 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%

Q3 2017 FINANCIAL REVIEW

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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.

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

ADJ. EBITDA1 $112.4M• Increased 9.1%

• 12.0% of sales, up 80bps

• Increased volumes and improved efficienciesdrove margin expansion

DILUTED EPS ($0.16)ADJ. DILUTED EPS2 $0.23

• Higher adj. EBITDA and benefit from hurricane-related sales of approximately $0.01 per share

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

(2) Adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

FY 2017 UPDATED OUTLOOK

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REVENUE OTHER

ADJ EPS1

-1% to flat

$0.85 to $0.90Adj 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

Depreciation & Amortization $145 to $150 million

Net interest expense $14 to $16 million

Effective tax rate Approximately 33.0%

Diluted shares outstanding ~210.5 million

Capital expenditures $85 to $90 million

GAAP EPS $0.47 to $0.51

(1) Adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

KEY TAKEAWAYS

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• Strong brands and a team committed to transforming the company

• Clear objectives to grow sales, expand margins, and deliver shareholder value

• Executing today on initiatives to reinvigorate the core, obtain fuel for growth, and improve financial performance

• Designing a company and operating model to deliver sustainable long-term value

Q&A

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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, thecompany may present in its public statements, press releases and SEC filings, non-GAAP financial measures such as, EBITDA, adjusted EBITDA, EBITDA margin, adjustedEBITDA margin, adjusted net income, adjusted operating income by segment, adjusted EPS, adjusted selling, distribution and administrative expenses (SD&A), grossmargin excluding depreciation and amortization and the ratio of net debt to adjusted EBITDA. The reconciliations attached provide reconciliations of the non-GAAPmeasures used in this presentation or release to the most comparable GAAP financial measure. The company’s definitions of these non-GAAP measures may differ fromsimilarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared inaccordance with GAAP. The company defines EBITDA as earnings from continuing operations before interest, income taxes, depreciation, amortization and incomeattributable 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'sability 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 andIncentive Compensation Plan. Furthermore, pursuant to the terms of our credit facility, EBITDA is used to determine the company's compliance with certain financialcovenants. The company also believes that EBITDA measures are commonly reported and widely used by investors and other interested parties as measures of acompany's operating performance and debt servicing ability because EBITDA measures assist in comparing performance on a consistent basis without regard todepreciation 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 netincome (loss) as a measure of operating performance; (b) cash flows provided by operating, investing and financing activities (as determined in accordance with GAAP) asa 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. Thecompany defines adjusted EBITDA, adjusted net income, adjusted operating income by segment, and adjusted net income per diluted share, respectively, excluding theimpact of asset impairment charges, acquisition-related costs, and pension plan settlements. The company believes that these measures, when considered together withits GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, byexcluding 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 andamortization 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 costsand operating activities. Presentation of gross margin includes depreciation and amortization in the materials, supplies, labor and other production costs according toGAAP. Our method of presenting gross margin excludes the depreciation and amortization components, as discussed above. The reconciliations attached providereconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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For the 12 Week Period Ended


October 7, 2017 October 8, 2016

Net income (loss) per diluted common share (0.16)$ 0.19$ Restructuring and related impairment charges 0.29 - Lease terminations/legal settlement/extinguishment loss 0.01 0.01 Project Centennial consulting costs 0.02 - Pension plan settlement loss 0.01 0.01 Multi-employer pension plan withdrawal costs 0.05 - Adjusted net income per diluted common share 0.23$ 0.21$ Certain amounts may not add due to rounding.

Flowers Foods, Inc.

Reconciliation of Earnings (Loss) per Share to Adjusted Earnings per Share

(000's omitted, except per share data)Reconciliation of GAAP to Non-GAAP Measures


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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%

Reconciliation of Net Income (Loss) to Adjusted EBIT and Adjusted EBITDA


Flowers Foods, Inc.


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Earnings (loss) before interest and income taxes (20,239)$ 66,331$ Lease terminations and legal settlement 4,253 1,250 Restructuring and related impairment charges 76,625 - Multi-employer pension plan withdrawal costs 18,268 - Adjusted EBIT 78,907 67,581 Depreciation and amortization 28,286 27,852 Depreciation on lease terminations - - Adjusted EBITDA 107,193$ 95,433$


Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - DSD


Flowers Foods, Inc.


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Earnings (loss) before interest and income taxes (9,082)$ 12,311$ Restructuring and related impairment charges 20,091 - Adjusted EBIT 11,009 12,311 Depreciation and amortization 4,769 4,585 Adjusted EBITDA 15,778$ 16,896$


Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Warehouse Delivery


Flowers Foods, Inc.


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EBIT (24,445)$ (12,511)$ Project Centennial consulting costs 7,050 1,219 Pension plan settlement loss 3,030 1,832 Restructuring and related impairment charges 3,833 - Adjusted EBIT (10,532)$ (9,460)$ Depreciation and amortization (83) 93 Adjusted EBITDA (10,615)$ (9,367)$

Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Corporate


Flowers Foods, Inc.


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Trailing 52 Week 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 32,972 146,562 EBITDA (loss) 53,442 147,313 104,294 (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 - - - 100,549 100,549 Asset impairment 24,877 - - - 24,877 Multi-employer pension plan withdrawal costs - - - 18,268 18,268 Pension plan settlement loss 173 - - 3,030 3,203 Legal settlement 9,250 250 - 4,253 13,753 Adjusted EBITDA 91,591$ 132,815$ 113,683$ 112,356$ 450,445$

Flowers Foods, Inc.Reconciliation of GAAP to Non-GAAP Measures

(000's omitted)

Reconciliation of Net Income (Loss) to Adjusted EBITDA


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As ofOctober 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 1.9

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


(000's omitted)


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932,822$ 918,791$

476,170 476,760 Gross Margin excluding depreciation and amortization 456,652 442,031 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$

13,419 12,723Total depreciation and amortization 32,972$ 32,530$

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

Depreciation and amortization for selling, distribution and administrative activities


(000's omitted)

Reconciliation of Gross Margin


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355,599$ 341,538$ Project Centennial consulting costs (7,050) (1,219) Legal settlement and related tax liabilities (4,253) (1,250)

344,296$ 339,069$

Sales 932,822$ 918,791$ Adjusted SD&A as a percent of sales 36.9% 36.9%

Adjusted selling, distribution and administrative expenses


(000's omitted)

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

Selling, distribution and administrative expenses


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Adjusted EBITDA 112,356$ 102,962$ 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$

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Reconciliation of Adjusted EBITDA to Cash Flow from Operations

Flowers Foods, Inc.



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Income tax expense (benefit) (22,925)$ 21,232$ Tax impact of:Lease terminations and legal settlement 1,638 481 Project Centennial consulting costs 2,714 469 Restructuring and related impairment charges 38,711 - Multi-employer pension plan withdrawal costs 7,033 - Pension plan settlement loss 1,167 705 Adjusted income tax expense 28,338$ 23,619$

Reconciliation of Income Tax Expense (Benefit) to Adjusted Income Tax Expense


Flowers Foods, Inc.


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Net income (loss) (33,571)$ 40,216$ Lease terminations and legal settlement 2,615 769 Project Centennial consulting costs 4,336 750 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$

Reconciliation of Net Income (Loss) to Adjusted Net Income


Flowers Foods, Inc.


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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 0.11 0.12 Restructuring and related impairments 0.29 0.29 Pension plan settlement loss 0.01 0.01 Multi-employer pension plan withdrawal costs 0.05 0.05 Lease terminations and legal settlement 0.01 0.01 Adjusted net income per diluted common share 0.85$ to 0.90$

Range Estimate

Reconciliation of Earnings per Share - Full Year Fiscal 2017 Guidance

NOVEMBER 9, 2017 - Flowers Foods/media/Files/F/Flowers...Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3...

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