Flowers Foods, Inc. · NYSE:FLO
Flowers Foods — Investor Presentation (March 2020)
36 slides from Flowers Foods's investor presentation, March 2020
Slide 1: Investor Update
= FlowersFoods Investor Update March 2020
Slide 2: Regarding Forward-Looking Statements
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 exp
Slide 3: Flowers Investment Highlights
Flowers Investment Highlights Leading Brands in a Operate the #1 organic bread, loaf bread, and gluten‐free bread brands in Large and Stable the U.S. in Dave’s Killer Bread, Nature’s Own, and Canyon Bakehouse. Market Growth in Strategy developed to capitalize on underdeveloped regions and build shar
Slide 4: Business Overview
Business Overview Value Creation Strategy Financial Review & Outlook Business Overview
Slide 5: Leading Fresh Bakery Brands Drive Our Business
Leading Fresh Bakery Brands Drive Our Business SALES OVERVIEW BRAND PORTFOLIO HIGHLIGHTS Store branded #1 loaf bread brand retail 16% Branded #1 organic bread brand FY19 Sales Breads 50% $4.1B #1 and FASTEST GROWING gluten‐free Branded bread brand in U.S. Snack Cakes Non‐retail & 10% 98% consumer aw
Slide 6: Fresh Bakery Market Overview
Fresh Bakery Market Overview $32.4B FRESH BAKERY MARKET Large and RETAIL & FOODSERVICE US FRESH BAKERY ‐ RETAIL OUTLETS stable market $30.0 $ in Billions $23.9 $24.0 $24.3 $24.7 $23.7 $7.7B $25.0 Foodservice1 $20.0 $15.0 $10.0 $24.7B $5.0 Retail Breads, Snack Cakes, Tortillas2 $‐ 2015 2016 2017 2018
Slide 7: Improving Competitive Position
Improving Competitive Position FRESH PACKAGED BREADS SHARE FLOWERS MARKET SHARE CHANGE #2 0.9 0.9 Baker and 0.8 0.8 Growing Share 23.0% 16.9% Store brands Flowers 0.6 0.5 0.4 0.4 29.1% BBU/ 0.3 25.0% Sara Lee Independent bakers 6.0% Pepperidge Farm 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 7 IRI
Slide 8: Smart, Disciplined M&A Driving Share Gains
Smart, Disciplined M&A Driving Share Gains $ in Millions Capturing growth TOTAL ORGANIC FRESH TOTAL GLUTEN‐FREE FRESH by anticipating PACKAGED BREADS PACKAGED BREADS shifting consumer preferences $694.7 $604.1 $320.3 $294.1 FLO $267.3 $488.0 $257.3 Share $232.1 FLO $355.5 64.7% Share $274.3 25.3% FY
Slide 9: Underdeveloped Markets Provide Upside
Underdeveloped Markets Provide Upside Substantial room FRESH PACKAGED BREADS CATEGORY DOLLAR SHARE IN THE US to grow share 5.3 8.5 GREAT LAKES & PLAINS 43.1 NORTHEAST 37.4 27.5 32.7 24.2 21.4 15.2 25.8 MID SOUTH, 28.1 25.7 CALIFORNIA SOUTH CENTRAL, & WEST 35.2 & SOUTHEAST 23.7 ■ Flowers ■ Store Bran
Slide 10: Market Share Opportunities Beyond Loaf Breads
Market Share Opportunities Beyond Loaf Breads #1 in Traditional Loaf Brand extensions and M&A in adjacent segments DKB extension driving share gains in breakfast segment $4.5 $4.0 Billions $4.0 $3.5 $3.4 $3.0 $2.5 $2.0 $2.0 $1.6 $2.0 $1.5 $1.0 $0.4 $0.3 $0.5 $0.2 $0.0 Traditional Loaf Specialty/Prem
Slide 11: Well Positioned as E-Commerce Accelerates
Well Positioned as E‐Commerce Accelerates FRESH BREAD & ROLLS E‐COMMERCE CHANNEL $700.0 $ in Millions Fresh Bakery E‐Commerce $595.7 Channel Facts: $600.0 • $595.7M channel, $500.0 +51% YOY growth1 • E‐commerce is ~4% of total $400.0 $395.6 fresh bread & rolls category2 • Flowers’ leading brands pro
Slide 12: Broad Scale is a Platform for Profitable Growth
Broad Scale is a Platform for Profitable Growth 46 Channels served Grocery / Mass Operating bakeries Natural & Organic Club & Dollar, C‐store Direct‐store‐distribution access to E‐commerce Foodservice & Vending 85% of the U.S. population 9,700 5,590 Warehouse NATIONWIDE IDP* territories distribution
Slide 13: Value Creation Strategy
Business Overview Value Creation Strategy Financial Review & Outlook Value Creation Strategy
Slide 14: Project Centennial Defined Our Strategic Priorities
Project Centennial Defined Our Strategic Priorities DEVELOP TEAM FOCUS ON BRANDS • Restructure around • Prioritize national brands priorities, drive execution • Invest in brand growth • Add critical capabilities to and innovation build brands, manage costs, • Streamline product and deliver insights
Slide 15: We're Delivering on the Playbook
We're Delivering on the Playbook HIGHLIGHTS 2017 2018 2019 Stood up business units Designed new organization Updated incentive comp TEAM and hired CMO and created PG&S*, framework FP&A* teams Launched DKB breakfast Launched Nature’s Own New ads for Nature’s BRANDS line Perfectly Crafted line Own, Wo
Slide 16: New Org Structure Enables Execution on Strategic Priorities
New Org Structure Enables Execution on Strategic Priorities Providing a foundation for LEGACY ORGANIZATION NEW WAYS OF WORKING the company we want to become Perspective Regional National Brand Strategies Locally Managed Clarified Portfolio Roles Cost Duplicated Centralized Management Responsibilitie
Slide 17: Innovation and Marketing Investments in Key Brands
Innovation and Marketing Investments in Key Brands Nature’s Own Perfectly Crafted New media campaigns for driving brand share growth Nature’s Own and Wonder Wonder Honey Power of strategic partnerships: Buns drive in‐store USO/Wonder/Tastykake displays Canyon Bakehouse Dave’s Killer Bread #lovebread
Slide 18: Prioritizing Margin with Portfolio, Network Review
Prioritizing Margin with Portfolio, Network Review Orient the Portfolio to… Optimize Network for… • High‐potential brands • Today’s customer trends • Disruptive innovation • National scale • Value‐over‐volume • Omni‐channel • Strategic customers • Reduced complexity • Underdeveloped segments • Workf
Slide 19: Pursue Smart M&A in Adjacencies
Pursue Smart M&A in Adjacencies Disciplined approach to M&A to expand position and diversify in high‐ growth bakery categories GROW IN‐STORE BUILD ON LEADING GROW BAKED SNACKS BAKERY/DELI FOODSERVICE POSITION • Evolve cake strategy to • Grow specialty brands on the • Expanding share of growing lever
Slide 20: Financial Review & Outlook
Business Overview Value Creation Strategy Financial Review & Outlook Financial Review & Outlook
Slide 21: Q4 2019 Financial Review
Q4 2019 Financial Review NET SALES $917.8M +4.2% v PY CASH FLOWS – FY19 • Canyon acquisition +3.0% • Cash from Ops = $367.0 million • Price/Mix +2.1%; Volume ‐0.9% • Capex = $103.7 million • Growth from DKB, Canyon, new products • Dividends = $160.0 million and pricing, offset by volume declines in
Slide 22: Three Areas of Focus to Improve Profitability
Three Areas of Focus to Improve Profitability 1. Optimizing the portfolio and streamlining the supply chain • 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
Slide 23: FY 2020 Guidance
FY 2020 Guidance (Provided February 5, 2020) Fiscal 2020 REVENUE CHG(1) ADJ EPS(2) Considerations: • Category volume elasticities +2.0% to +4.0% $1.00 to $1.08 • Commodity market volatility may affect promotional environment OTHER • Labor markets remain tight with higher wages Depreciation & amortiz
Slide 24: Project Centennial Roadmap
Project Centennial Roadmap FY 2017 – 2018 FY 2019 & Beyond • Generate savings • Invest in growth Focus • Design future organization • Leverage capabilities • Sales growth: flat to +2% • Sales growth: 3% to 4% Targets • EBITDA margins: ~12% to 13% • EBITDA margins: ~13% to 14% Progress Gross saving
Slide 25: Financial Progress Impacted by Inflationary Pressures
Financial Progress Impacted by Inflationary Pressures % CHANGE: FY16 THROUGH FY19 Taking action to: 13.0% 12.8% 11.0% • Rationalize pricing Delivered 9.0% 10.3% Leveraged • Reduce stales & scrap topline target 7.0% indirect costs • Improve efficiencies 5.0% 6.3% 3.3% 5.0% • Build a career‐ focus
Slide 26: Track Record of Growing Free Cash Flow & Dividends
Track Record of Growing Free Cash Flow & Dividends Strong free cash FREE CASH FLOWS AND DIVIDEND GROWTH flow growth supports $ in Millions investments in the Free Cash Flow* Dividends Paid business, M&A Top Line Drivers $300 strategy and $250 capital returns • Market share gains • Strategic acquisit
Slide 27: Balanced Capital Allocation
Balanced Capital Allocation Capital Allocation CAPITAL ALLOCATION Principles: $ in Millions • Capex to support core business growth $395 • Maintain investment Dividends Share Repurchases Cash for Acquisitions grade credit rating • Support strong dividend • Smart, disciplined $200 acquisitions • Oppo
Slide 28: Investment-Grade Credit Rating Commitment
Investment‐Grade Credit Rating Commitment MAINTAINING FLEXIBILITY TO CAPITALIZE ON VALUE‐CREATING OPPORTUNITIES Total Debt (ex‐lease liabilities) Aggregate Maturities at 19FY (Maturities)* $984 $980 $928 $867 $442 $805 $400 $4 $26 $‐ $‐ 15FY 16FY 17FY 18FY 19FY 20FY 21FY 22FY 23FY 24FY 25FY+ At 19FY
Slide 29: Our Vision
Our Vision 1919 1968 to 2018 As America’s premier baker, we craft foods that make One family‐owned More than people smile. We are driven bakery in Thomasville, GA 100 acquisitions by a passion to boldly grow our business through Listed publicly inspiring leadership, as FLO teamwork, and creativity.
Slide 30: Regarding Non-GAAP Financial Measures
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 m
Slide 31: Regarding Non-GAAP Financial Measures
Regarding Non‐GAAP Financial Measures Flowers Foods, Inc. Reconciliation of GAAP to Non‐GAAP Measures Reconciliation of Earnings per Share to Adjusted Earnings per Share For the 12 Week For the 12 Week Period Ended Period Ended December 28, 2019 December 29, 2018 Net income per diluted common share
Slide 32: Regarding Non-GAAP Financial Measures
Regarding Non‐GAAP Financial Measures Flowers Foods, Inc. Reconciliation of GAAP to Non‐GAAP Measures Reconciliation of Net Income to EBITDA and Adjusted EBITDA For the 12 Week For the 12 Week Period Ended Period Ended December 28, 2019 December 29, 2018 Net income $ 2,219 $ 20,841 Income tax expens
Slide 33: Regarding Non-GAAP Financial Measures
Regarding Non‐GAAP Financial Measures Flowers Foods, Inc. Reconciliation of GAAP to Non‐GAAP Measures (000's omitted) Reconciliation of Net Income to EBITDA and Adjusted EBITDA For the 52 Week For the 52 Week Period Ended Period Ended December 31, 2016 December 28, 2019 Net income $ 163,776 $ 164,53
Slide 34: Regarding Non-GAAP Financial Measures
Regarding Non‐GAAP Financial Measures 34
Slide 35: Regarding Non-GAAP Financial Measures
Regarding Non‐GAAP Financial Measures Flowers Foods, Inc. Reconciliation of GAAP to Non‐GAAP Measures Reconciliation of Earnings per Share ‐ Full Year Fiscal 2020 Guidance Range Estimate Net income per diluted common share $ 0.50 to $ 0.64 Pension plan settlement loss 0.50 0.44 Adjusted net income p
Slide 36: Regarding Non-GAAP Financial Measures
Regarding Non‐GAAP Financial Measures Flowers Foods, Inc. Reconciliation of GAAP to Non‐GAAP Measures (000's omitted) Reconciliation of Cash Provided by Operating Activities to Free Cash Flow* Cash Provided by Purchase of Plant, Operating Property and Time Period Activities Equipment Free Cash Flow